Business Mathematics Module

CONTENTS
1. Review of High School Topics 1.1
2. Working With Functions

Converting Rules to Single Formulas 2.2
Converting Rules to Multiple Formulas 2.7
Graphs of Functions 2.14
Functions as Tables 2.18
3. Applications of Linear Functions

Linear Depreciation 3.1
Linear Interpolation 3.3
Linear Extrapolation 3.6
Linear Regression 3.7
4. Linear Inequalities
Manipulating Inequalities 4.1
Graphical Interpretations 4.3
Combining Inequalities 4.6
Linear Programming 4.8
5. Logarithms
Solving Index Equations for the Base 5.1
Solving Selected Index Equations for the Index 5.2
Definition of a Logarithm 5.3
Properties of Logarithms 5.5
Solving an Equation for the Index 5.7
6. Exponential Functions
Graphs of Exponential Functions 6.1
Business Applications 6.5
Using a Common Base 6.8
Postscript 6.11
7. Boolean Algebra
Truth and Falsity 7.1
Negation 7.2
The “AND” Conjunction 7.5
The “OR” Conjunction 7.7
Multiple Conjunctions 7.8
Negation of Statements containing an “AND” or an “OR” 7.12
Application to Database Queries 7.3
8. Counting Principles
The Multiplication Principle of Counting 8.1
Applications of the Counting Principle 8.4
9. Marginal Functions
Marginal Values and Functions 9.1
Marginal Profits 9.2
Marginal Taxation Rates 9.6
Interpretation of Marginal Functions as Rates of Change
Appendix: Questions for Review of High School Topics

INTRODUCTION
This module contains the mathematics and techniques that we believe is essential for students taking a
degree programme in Business and Property Studies.
Much of the mathematics needed for Business and Property Studies is covered in high school –
particularly in the grade 12 major syllabuses. Where a topic in this syllabus is covered in depth in the
high school syllabus, we will review the results only. However the appendices to this module contains
questions and exercises on all topics in the syllabus – and students who have not taken grade 12 major
mathematics, or have done badly at this level, should take extra time and ensure that they understand
and can apply the techniques of these sections.
Other topics in this module explicitly and implicitly use the mathematics in these (high school) results,
and they will be tested in assignments, tests and examinations.
Calculators
Not all calculators work the same way, or display results the same way. You will use a scientific
calculator in all your studies. You should know how your particular calculator works. In particular you
must know how to:
 make corrections to incorrect key strokes pathway through the calculation,
 recall previous calculations,
 use the calculator memory or memories,
 use the calculator’s various arithmetic functions (including root, square, power, exponential,
logarithm and percentage functions),
 clear the calculator’s current operation and all memories,
 recognise numbers displayed in scientific notation and be able to enter numbers in this notation,
 use any special features (such as constant calculations) of the calculator.
Later you will also need to know how to use the statistical features of your calculator and if you decide
to take a computing option, you will need to know how to use the different number bases built into your
calculator.
All of the above you can find out by studying the calculator’s handbook.
There are many books in the library on Business Mathematics. One recommended text is :
K.L. Whipkey and G.W. Conway “The Power of Mathematics – Applications to Business"
Produced by the; Department of Mathematics and Computer Science,

Papua New Guinea University of Technology, Lae
C.Wilkins 2002
1st Updated: B Angopa, 2018
Review of High School Topics 1.1
CHAPTER 1: REVIEW OF HIGH SCHOOL TOPICS
This chapter reviews many topics taught in the high school syllabus. Appendix 1 contains review
question on each topic. We will not cover this material in class, however the material will be used in the
mathematics that we do, and may be asked in assignments, tests and examinations.
ORDER OF OPERATIONS
Not all operations in mathematics have the same precedence. When evaluating expressions in
arithmetic or algebra, we perform multiplications and divisions before additions and subtractions. And
we perform functions (example; square, square root, power) before multiplications and divisions. [So
functions have a higher precedence than multiplications and divisions, which in turn have a higher
precedence than additions and subtractions.
When we have several operations of the same precedence, we evaluate left to right.
Where we wish to evaluate an expression in another order, we introduce brackets. (Note that fraction
lines and square root bars infer brackets.) So brackets have a higher precedence than all other
operations.
We would need to use these rules of precedence to evaluate the following:
The value of at
The value of ( )
√
INDICES
When writing down many algebraic expressions we use a shorthand index notation. An (index
expression is of the form . [x is the base of the expression, and n is its index]. x and n can be
numbers, pro-numerals, or compound algebraic expressions.
Sometimes there are restrictions on the value of x (such as, x must be positive), but the value of n can be
any integer, rational or irrational number.
We have the following definitions and rule concerning indices:

( ).
( ) if n is a positive integer.
⁄
[ √ ] where q is a positive integer, is that value which when multiplied by
itself q times, gives x.
⁄
[ √ ] where p and q are positive integers, is that value which when
multiplied by itself q times, gives .
where y is irrational, is interpreted using logarithms. [See later].
.
We are able to prove that the following rules involving indices:
( )
( ) ( )
In mathematics, often knowing what is not true is as important as knowing what is true. For example,
note the following (non equalities): In general;
( ) ( )
Note: The sign of the base requires special mention. If the index is an integer or a rational number
with an odd denominator, then the base can be any positive, negative, or zero number [00 is not
defined]. If the index is an irrational number or a rational number with an even denominator, then the
base must be positive.
We use indices to write many algebraic expressions, and in particular formulas. For example;
Compound Interest formula: ( ⁄ )
In fact, most financial mathematical formulas involve indices.

MANIPULATING FORMULAS AND EQUATIONS
We are often required to rearrange a formula (to make a new variable the subject), or to solve an
equation for the value of a variable. The basic rule for such manipulations is “whatever you do to one
side, you should do to the other side”. In particulars we can:
 add or subtract a term from each side of a formula or equation,
 multiply or divide each side of a formula or equation by a factor,
 (with restrictions) apply a function to both sides of a formula or equation, and
 switch the left hand and right hand side of a formula or equation at any time.
We would have to use these operations to do the following:
Make R the subject of the formula:
Solve ( ⁄ ) for i.
HIGHEST COMMON FACTORS AND LOWEST COMMON MULTIPLES

We often have a set of two or more numbers or algebraic expressions.
The largest number or algebraic expression that will divide into each of the expressions is called the
highest common factor. We use the highest common factor to factorise algebraic expressions and
simplify fractions.
The smallest number or algebraic expression which each of the expressions will divide into is called the
lowest common multiple. We use the lowest common multiple to place a sum or difference of fractions
over a common denominator.
Factorise
Place the following over a common denominator
REMOVING BRACKETS
We remove brackets to turn a product of factors into a sum or difference of terms. This skill is needed
in simplifying formulas and solving equations.
Particular care must be taken with signs when removing brackets – taking note of the arithmetic rules;
We would use the skills of removing brackets in re-writing ( )( ) without brackets.

FACTORISING
We factorise to turn a sum or difference of terms into a product of factors. This skill is needed in
simplifying formulas and solving equations.
We would use the skills to factorise the expression as a product of two factors.
FUNCTIONS AND GRAPHS OF FUNCTIONS
Functions are special relationships between variables. The formula for Simple Interest (SI = P R T) is
an example of a function. In this function, the 3 variables on the right-hand side of the formula (ie, P, R
and T) are called the Independent variables, while the variable on the left-hand side of the formula
(ie, SI) is called the dependent variable.
The key concept of functions is that if we give a value to the independent variable(s), we determine
precisely the value of the dependent variable. For this function we might write SI = f (P, R, T), - which
emphasises the fact that the value of SI depends (or is a function of) the values of P, R, and T.
We most often represent functions by formulas. But we can also represent the function by describing
what the function does, or we can draw a graph of the function. If the function has one independent
variable, we can use a regular sheet of graph paper to draw its graph. We normally place the
independent variable values along the horizontal axis of this graph paper, and the dependent variable
values along the vertical axis. The function itself is represented by a line trace on the graph paper.
The trace of the function can have almost any shape, with one exception – a vertical line on the graph
paper should cut the trace of the function at most once. In fact it turns out that if we may represent the
function by a simple formula, then the trace usually turns out to be a straight line or relatively simple
sooth curve.
Below is a graph of the function y = 1.051.4x [Note, this function could be represented as y = f(x)].
2
1.8
1.6
1.4
1.2
1
y
0.8
0.6
0.4
0.2
0
0 2 4 6 8 10
x
LINEAR FUNCTIONS
Linear functions are the most commonly used of all mathematical functions. They are used to create
mathematical models of real life situations.
The graph of a linear function is a straight line.
The general formula of a linear function is: y = mx + c. The slope (rise ÷ run) of the straight line
graph of this function is m, and the y- axis intercept is c.
If we write the formula in the form , then the straight line cuts the x-axis at b, and the y-axis
at c.
As an example, the graph of the function is a straight line which cuts the x-axis at 0.2
and has a slope + 0.05.
QUADRATIC FUNCTIONS
The graph of a quadratic function is a parabola.
The general formula of a linear function is: . The graph of this function intercepts the
y-axis at c. If a is positive, the parabola has a minimum turning point. (If a is negative, it has a
maximum turning point).
If we can factorise the right-hand side, and write the formula in the form ( – )( – ), then the
parabola cuts the x-axis at and .
If we write the right-hand side in the completed square form ( – ) , then the coordinates of
the turning point of the parabola are ( ).
The graph of the quadratic function – is a parabola which cuts the y-axis at + 10, and
has a minimum turning point (since is positive). We could factorise the right-hand side of the
formula to get ( – )( – ). We now know that the function cuts the x-axis at x=2 and x=5. We
could complete the square on the right-hand side of the formula to get ( – ) – . We now
know that the turning point of the parabola has coordinates (3.5, -2.25).
EQUALITIES AND INNEQUALITIES

Consider two values a and b.
 If the two values are equal, we write a = b.
 If the two values are not equal, we write a b.
 If the value of a is less than (or more negative) than the value of b we write a < b.
 If the value of a is greater than (or more positive) than the value of b, we write a > b.
 If the value of a is not greater than the value of b, we write a ≤ b.
 If the value of a is not less than the value of b, we write a ≥ b.
SIMULTANEOUS EQUATIONS
Occasionally we are faced with a situation where we must find values that satisfy two or more
equations at the same time. Most often these equations are linear, and we call the set of equations to be
solved “simultaneous equations”. The method of solving such sets of equations is to attempt to
combine two equations, forming another equation with one less variable. We continue this until we
have one equation in one variable.
To solve the linear equations 3x – 5y = 10

and 9x + y = 46 simultaneously, we could multiply the first by 3 (to
get 9x – 15y =30), then subtract this from the second equation to get (9x + y) – (9x – 15y) = 46 – 30.
Simplifying this gives 16y = 16. Solving this single equation in one variable gives y = 1.
Substituting y = 1 back into the first equation now gives 3x – 5 = 10. Solving this single equation in
one variable gives x = 5. So our values which simultaneously satisfy both equations are x = 5 and y = 1.
CONVERTING WORD PROBLEMS TO FORMULAS AND EQUATIONS

The purpose of mathematics is to allow us to solve real world problems by making a mathematical
model of the problem then solving the problem. For example, in business studies we must calculate
interest, and set up annuities, and examine loan repayment schemes. Each problem requires us to build
up a mathematical model of the process. For example, in simple interest calculations we know that the
interest should be proportional to the principal, the rate of interest, and the time over which the interest
should be calculated. The appropriate constant of proportionality is 1. Putting all this together we may
deduce the simple arithmetic formula SI = PxRxT, which once known may be conveniently used over
and over again.
The procedure of turning a word problem into a mathematical formula or equation is one of the harder
tasks of mathematics. But the task involves some necessary two tasks. These are:
 We must introduce a variable (or pro-numeral) to represent any value that may change value – and
in particular for the value that we are trying to find.
 We must attempt to turn phrases and sentences of the word problem to be solved into mathematical
sentences.
Once we have turned a word problem into a mathematical problem, we can then solve the mathematical
problem (if it is an equation). A solution to the mathematical problem is the solution to the real world
problem.
Some problems are very simple, and may only involve one variable. Others are extraordinarily
complicated and may involve many variables. Economists may use functions of a hundred or more
variables to model the way an economy works.
Working With Functions 2.1
CHAPTER 2: WORKING WITH FUNCTIONS
A constant is a quantity whose value cannot change. Examples of constants are the number of hours in
a day and the ratio of the circumference to the diameter of a circle (ie, π). The opposite of a constant is
a variable, which is a quantity whose value may change. Examples of variables could be interest rates,
daily temperature, annual salary, marks obtained on a test, etc.
A function is a relationship between two or more variables where we can calculate precisely the value
of one variable (called the dependent variable or output variable) from the values of the other
variable(s) (called the independent variable(s) or input variable(s)).
In high school mathematics, most functions we meet have one independent variable (usually written as
x) and one dependent variable (usually written as y). Examples are linear functions (eg, y = 3x – 5) or
quadratic functions (eg, y = x2 – 4x + 11). But functions may have any number of independent
variables, and we will look at some of these in this chapter.
We may represent functions by rules, formulas, graphs or table of values. Although all representations
are useful, the most often representation used is the formula. Some of the advantages of the formula
representation are:
 We can use the formula to quickly find the solution to a particular problem using a computer,
calculator, or hand calculation. Business people very often use the formulas with spread sheets to
perform “what if” calculations.
 We can use the rules of mathematics on the formula to change the roles of our independent and
dependent variables.
 We can use the formula to construct an equation, which we can in turn solve using the rules of
mathematics.
In this chapter we look at the problem of converting a rule into a formula.

2.1 CONVERTING RULES TO SINGLE FORMULAS

If a rule tells us how to calculate the value of one variable if we set the value of one or more other
variables, then the rule is describing a function. We look at examples of such rules, and how to convert
them into (possibly more useful) formulas.
Example: Here is a description of how to calculate the selling price of an item after a 10% VAT is
added to the marked price:
To obtain the selling price after VAT, multiply the marked price by 10%,
then adding this value to the marked price.
Write this rule as a formula, then use the formula to determine the selling price if the pre-VAT marked
price is K170.
Solution: We first introduce letters (or names) for the variables, turn the words into mathematical
symbols, and then simplify.
We could let SP represent the selling price and MP represent the marked price. Then
SP = MP x 10% + MP
= MP (10% + 1)
= 1.1 x MP
When MP = 170, we have SP = 1.1 x 170 = 187 (or K187)
This last function has one independent variable (ie, MP). Function can have many independent
variables. In this next example our function has two independent variables.
Example: A storekeeper can calculate his proportional profit by subtracting his cost price from his
selling price, dividing the result by the cost price. Write this rule as a formula, and then use the formula
to calculate the percentage profit when the cost price is K120 and the selling price is K150.
Solution: We will use p for the percentage profit, SP for the selling price and CP for the cost price.
Then
When CP = 120 and SP = 150, then p = (150 – 120) ÷ 120 = 0.25 (or 25%
Note: This function has two independent variables (CP and SP).
Working With Function 2.3
Not all problems are this straightforward. This next example is much more complicated.
Example: A teacher gives his students 3 assignments (marked out of 10, 25 and 20 respectively), a
test (marked out of 40) and an examination (marked out of 100). The teacher has to give each student a
final mark out of 100, where each assignment is worth 10%, the test is worth 20%, and the final
examination is worth 50%. Find a formula for the final mark, and use this formula for a student who
gets 8, 20 and 20 for her three assignments respectively, 30 for her test and 65 for her final
examination.
Solution: We use M for the final mark, A1, A2 and A3, for the assignment marks, T for the test
mark, and E for the examination mark.
The exam (marked out of 100) must be reduced to a mark out of 50. We should divide
the exam mark by 2.
The test (marked out of 40) must be reduced to a mark out of 20. Using a ratio and
proportion argument, we should divide the test mark by 2.
The three assignment marks (marked out of 10, 25 and 20) must be adjusted to a mark
out of 10. The first we do nothing. The second we must multiply by 10/25 (ie, 0.4), and
the third we must multiply by 10/20 (ie, 0.5).
Our final formula must be:
M = A1 + 0.4A2 + 0.5A3 + 0.5T + 0.5E
This formula is so complicated that we would only have confidence in its accuracy if we
were to test it against data for which we know the result. Three easy test cases would be:
(1) zero on assignments, test and exam should give a final mark 0.
(2) half marks on assignments, test and exam should give a final mark 50.
(3) full marks on assignments, test and exam should give a final mark 100.
The first is obviously true. The second gives:
5 + 0.4 x 12.5 + 0.5 x 10 + 0.5 x 20 + 0.5 x 50 = 50 √
The third gives
10 + 0.4 x 25 +0.5 x 20 + 0.5 x 40 + 0.5 x 100 = 100 √
So it seems that our formula is correct.
Our student who receive scores of 8, 20 and 20 for the assignments, 30 for the test, and
65 for the examination would get
M = 8 + 0.4 x 20 + 0.5 x 20 + 0.5 x 30 + 0.5 x 65 = 73.5
Note: This marks function has five independent variables (A1, A2, A3, T and E).
Using Formulas to Find the Value of an Independent Variable

Formulas are particularly useful when we need to find the value of a dependent variable corresponding
to a particular independent variable value. Going the other way – finding the value of the independent
variable if we know the value of the dependent variable is often more difficult.
The first important observation is that such a problem (ie, finding the value of the independent variable)
may have no value, a single value, or multiple values [which is unlike finding the value of the dependent
variable, which must have a single value].
If the function is represented by a formula, the two techniques available to find the value(s) of an
independent variable are:
 Use the formula to create an equation, then solve the equation,
 Use algebra to make the dependent variable the subject of the formula [ie, turn the independent
variable into the dependent variable].
Example: The previous formula for percentage profit was . Use both the solving
equation and rearranging formula technique to find the value of CP if the selling price is K140, and the
percentage profit based on cost is 25%.
Solution: We first use the solving an equation approach:
We have
Therefore,
Secondly we use the re-arranging formula approach:
We have
Therefore,
( )
We now substitute SP=140, and p=0.25 to get

( ) (as before)
Note that this independent variable has a single value (the cost price was K112). But we may find that
the variable has no value, or multiple values.
Exercises
1. A supermarket has two types of noodles on sale – Chicko Quick Noodle at 60t per packet, and
Bindabel Superior Noodles at K1.10 per packet. I take K20 into the supermarket and purchase some
packets of each type of noodle.
(a) Find a formula for the change I would receive after my purchase.
(b) How many independent variables does this change function have?
(c) Use your formula to find the change if I purchase 8 packets of Chicko Quick Noodles and 5
packets of Bindabel Superior Noodles?
(d) Use the formula in (a) to formulate and solve an equation to find the number of Chicko Quick
Noodles I have purchased if I came out of the store with 5 packets of Bindabel Superior
Noodles and had K9.10 change. [Do not just write down the answer.]
2. A particular type of telephone installation will only allow local calls. The monthly charging rule for
this installation is - charge 30t for each local call, add a monthly rental charge of K5.50, then add
10% VAT to the final value.
(a) Find a formula for the amount of the monthly telephone account.
(b) How many independent variables does this account function have?
(c) Use the formula to find the monthly charge if 45 local calls are made.
(d) Rearrange the formula in (a) to find another formula in which the number of local calls is the
independent variable. Use this formula to find the number of local calls if the account value is
K30.14
3. Suppose the PNG Electricity Commission’s rule for calculating the monthly charge to customers is
to charge 18 toea for every unit (kilowatt hour) of electricity used. 10% VAT is added to the charge.
(a) Find a formula for the amount in kina for a monthly electricity account.
(b) Use the formula to determine the charge for using 250 units in a month.
(c) Use the formula in (a) to formulate and solve an equation to find the number of units used if the
total charge is K25.74.
4. The rule for calculating simple interest (SI) is to multiply the principal (P) by the rate (r) of interest
by the length of the investment (T) in years.
(a) Find a formula for Simple Interest.
(b) How many independent variables does this function have?
(c) If the principal is K200, the interest rate is 15%, and the time 2.5 years, use the formula to
calculate the simple interest of this investment.
(d) Rearrange the formula in (a) to find a formula for the principal if we know the simple interest,
rate of interest and length of the investment. Use this formula to find the principal if the simple
interest was K486, the rate of interest 12%, and the investment was for 3 years.
5. To calculate the amount of money after investing for a period of years in an account paying simple
interest (see question 4 above) the total interest is added to the initial principal.
(a) Find a formula for the amount (A) of the investment in terms of the principal (P), rate of interest
(r), and length of the investment (T) in years.
(b) Use the formula to find the amount to which a principal of K750 accrues under 12.5% interest
over 3 years.
(c) Use the formula in (a) to formulate and solve an equation to find the interest rate if a principal
of K1300 accrues to K1540 over a 4 year period.
6. A teacher must mark a student out of 100. The student has completed 4 assignments (each marked
out of 10), two tests (each marked out of 25), and an examination (marked out of 100). The
assessment used is to be 5% for each assignment, 10% for each test, and the remaining 60% for the
examination.
(a) Find a formula for the final mark using this system.
(b) How many independent variables does this function have?
(c) Find the final mark for a student who scores 6, 10, 7 and 8 in the assignments, 15 and 12 in the
tests, and 36 in the final examination.
7. A University printery produces student modules. The printery charges for a module depending on
the size of the module, the types of cover and binding used, and the number of books in a print run.
The charging formula is as follows: Charge 4 toea per page for paper and collating, and 20 toea per
page for cardboard covers. Next add a charge of 5 toea per written page for printing, labour, and
other page related costs; and charge K5.00 per printed page for masters that can be used for a
maximum of 500 copies. Finally add 20% to the calculated cost to cover for labour costs.
(a) Find a formula for a module that has P paper pages, and C cardboard covers, and is bound. Each
module has p pages of print, and the print run is m modules.
(b) Use the formula to find the charges for a module that has 60 pages, 2 covers, and is bound. Each
module has 121 pages of print, and the print run is 300 modules.
2.2 COVERTING RULES TO MULTIPLE FORMULAS

Domain is a term we use to refer to the values of the independent variable for which a function is
defined.
Many functions are defined for all value of the independent variable. Linear and quadratic functions
are examples of such functions. The domain for these functions consists of all the real numbers.
Other functions have restrictions on the value that the independent variable they may take. The
function √ is an example. We can only find the square root of a number if that number is non-
negative – we say that the domain consists of the values x ≥ 0. We often write this as:
√x x≥0
Example: What is the natural domain for the function √
Solution: The square root is only defined if 5 – 3x is non-negative. This occurs whenever x is
not greater than 5/3.
We could write: √ x 5/3
Besides natural restrictions on the values of the independent variables of functions, we may introduce
artificial restrictions. One such example might be the simple interest function [ ] It
perhaps makes no sense to use this function for non-negative principals, rates of interest, and time of
investment. We could restrict the domain of all three independent variables to be positive numbers, and
would write:
[ ] P ≥ 0, r ≥ 0, T ≥ 0
Example: The formula for the area of a circle is . This formula only makes sense if the
radius is non-negative. Write down the formula restricting the domain to this interval.
Solution: r≥0
Another use for artificial domains comes when we have a rule which cannot (easily) be represented by
a single formula, but can be represented by several formulas, each of which are applicable for certain
values of the independent variable(s). We call this multiple formula functions. Here are some
examples.
Example: A printery uses the following charging rule for printing business cards:
 For 200 cards or less, charge K20.

 For more than 200 cards, charge K1.20 flat, plus 40 toea for every card printed.
Find a formula for this charging function.
Solution: This function has a rule that can only be represented by two separate formulas, each
operating over different domains.
Let C = total charge in Kina [dependent variable], and

n = number of cards printed [independent variable]
One formula is C = 20, which should be used if

The other formula is C = 1.2 +0.04n, which should be used if n > 200
We can represent this in a single “multiple formula” as
We read this last multiple formula as:
If n 200 then C = 20, else if n > 200 then C = 1.2 + 0.04n.
We use this multiple formula as follows. Suppose we require the charge for an order of 350 cards. We
should use the second formula (since 350 > 200. So the charge would be:
C = 1.2 + 0.04 x 350 (kina)

= 15.20
In this next example the multiple formulas has three parts.
Example: A hypothetical charging rule for an electricity utility is as follows:
 For the first 200 units (kilowatt hours), charge 25t per unit
 For the balance, charge at 35t per unit
 The minimum charge should be K15 per month installation.
These charges include VAT.
Find a formula for this charging function.

Solution: Let C = total charge – [dependent variable, in Kina], and

u = number of units of electricity used [independent variable]
We first find the three individual formulas. The third is easy. C = 15 (except that we do
not know for what values of u it applies!).
The first is also easy. C = 0.25u.
The second is more difficult. If u is greater than 200 units, the charge is
C = 0.25 x first 200 units + 0.35 x remaining units
= 50 + 0.35 x (u – 200)
= 0.35u – 20
If we were to use 100 units, this charging rate would give a charge of 0.25 x 100 = K25. This is greater
than the minimum K15 charge, so for u = 100 we would use this rule. We need the crossover point
between the first and third formulas. We can solve the equation (C =) 0.25u = 15 to find the usage of
electricity that gives the minimum charge. The potion of this equation is u = 60. We should use the
third formula if u < 60, and the first formula if u is between 60 and 200 units (inclusive).
Our multiple formula becomes:
C={
We can now use the formula to calculate a charge. For example, the charge for suing 120 units would
be calculated as follows: 120 is in the domain of the second formula (ie, between 60 and 200), so we
use the second formula
Note 1: Writing “u between 60 and 200 inclusive” is messy. We have a shorthand notation,
which is 60 ≤ u ≤ 200. The syntax off this notation is:
The small domain value is on the left,

The larger is on the right,
The variable is in the middle, and
The symbols < and/or ≤ are used as separators.
The following are legal:

The following make no sense, and must never be used:
The following make sense, but would be rarely used:
150 ≥ x > 999 > y > 2000 31 > t ≥ 30
[Replacing the ≤ with the < symbol means that the variable cannot take the value the other side of the
inequality sign. So 30 < x ≤ 50 means that x can take any value between 30 and 50, including 50 but not
30].
Using this shorthand notation, the multiple formula of the last example would be more usually written:
Note 2: In the last two multiple functions, the value of the dependent variable at the formula boundaries
were the same.
Although this often happens (ie, two adjacent formulas have the same value at their common boundary)
it is not necessary. When the two end-points of adjacent interval give the same function value we say
that the function is continuous at the point. When the values are different we say that the function is
discontinuous at the point. Continuous functions have a graph that has no vertical break, while
discontinuous functions have a graph that has a vertical break at the point of the discontinuity. [We will
look at this in more detail later, in graphs of functions].
To overcome problems at boundaries of multiple functions we usually ensure that that boundary is
defined by one of the surrounding formulas. So in the first example above the value is defined
in the first formula; and in the second example the values and are both defined in the
second formula.
Using Multiple Formulas to Find the Value of an Independent Variable
When a function is represented by a multiple formula, and we wish to solve an equation to find an
independent variable value, we must try all formulas in the function.
Example: A function is represented by the multiple formula:
Find the value of for which
Solution: We must solve all three formulas for values of x which give L = 8.5
4 = 8.5 has no solutions!
0.12x = 8.5 has a solution x = 8.5/0.12 = 70.833333
0.14x – 2 = 8.5 has a solution x = (8.5 + 2)/0.14 = 75
x = 70.83333 is in the domain of the second formula, so this is a solution.

x = 75 is not in the domain of the third formula, so this is not a solution!
So the only solution to this problem is x = 70.83 (2 dp)
Note: We may find that such as problem has no solution, a single solution, or multiple solutions.
Ps. Note that this function is also continuous at the boundaries of the formulas. At the first two
formulas give . At the last two formulas give
Exercises
1. Write the following intervals using the shorthand notation described in note 1 of this section.
(a) x between 30 and 90 inclusive.

(b) a between 0 and 100, including 0 but not including 100.
(c) t between -30 and + 30, but not including either of these values.
(d) u between -20 and 50, including 50 but not including -20.
2. Write down the meaning of each of the following:

(a) 0 ≤ x ≤ 1000
(b) -50 < a < 50
(c) 20 < t ≤ 25
(d) 400 ≤ u < 420
3. Which of the following (1) do not make any sense, (2) make sense but rarely used to indicate an
interval, (3) a standard way to represent an interval?
(a) 200 < x ≤ 150
(b) 150 ≥ x < 200
(c) 150 ≤ x < 200
4. Consider the multiple formula
(a) Use the formula to find the value of L when

(i) x = 20 (ii) x = 45 (iii) x = 120
(b) Use the formula to find the value(s) of x for which

(i) L = 24 (ii) L = 10 (iii) L=2
5. The cost for a PMV operator to run his bus included the license fees. Suppose these fees were:
o when the bus carries up to (and including) 20 passengers: K150
o for every extra passenger: add K5
(a) What is the independent variable of this function rule?

(b) What is the dependent variable of this function rule?
(c) Write down a multiple formula for this function.
(d) Use this formula to calculate the license fee for a PMV which carries
(i) 15 passengers (ii) 20 passengers (iii) 30 passengers
(e) We can also turn a rule into a table of values. This particular function is probably better
represented by a table of values than a formula. Why?
6. An airline company sets its charges by applying the following rule:

o A fixed charge of K15 is added to cover the costs of ticketing and luggage handling
o A charge of K0.70 is added per kilometre for the length of the journey
o A variable charge is made to cover in-flight refreshments. This charge is zero for flights
less than 150km, K4 (light refreshments) for flights between 150km and 600km
inclusive, and K10 (meal) for flights over 600km.
Let P = one way ticket price between two ports, and d = distance between the ports.
(a) Construct a multiple formula for this function.

(b) Is this function continuous at the boundaries between the formulas?
(c) Use the formula to find the cost of a one way ticket for flights of length
(i) 80km (ii) 160km (iii) 150km (iv) 700km
(d) If a ticket costs K180, how long is the journey?
7. An income tax is calculated using the following rules:

o Deduct K1000 from the total income (I) for each dependent
o From this new amount (NI), tax is calculated as follows:
no tax, if NI < K4,000
10% of I if K4,000 ≤ NI < K10,000
20% of I, if K10,000 ≤ NI < K30,000
30% of I, if NI ≥ K30,000
Let T = total tax due, n = number of dependents, and I = total (taxable) income.
(a) Find a multiple formula for this taxation function.
(b) What is the taxation of a person who earns K28,000 a year, and has 3 dependents?
8. A company with 200,000 shares on issue pays dividends to shareholders according to the
following rule:
If the profit is less than K20,000, no dividends are paid.
20% of all profits in excess of K10,000 is paid to shareholders on a pro-rata basis [ie,
proportional to the number of shares the shareholder holds].
(a) If the company made a profit of K20,000, how much would be the dividend for a shareholder
who had 5,000 shares?
(b) In this function, let P = company’s Kina profit [so is the profit in excess of
K20,000], S= number of shares held by a shareholder, and
D = dividend paid to the shareholder. Convert this rule to a multiple formula.
(c) Use the multiple formula in (b) to find the dividend paid to a shareholder who holds 2,000
shares, when the company’s profit is K8,500.
(d) Use the multiple formula in (b) to find the dividend paid to a shareholder who holds 10,000
shares when the company makes a profit of K28,000.
2.3 GRAPHS OF FUNCTIONS

Functions which have one independent variable may be represented as a graph (perhaps drawn on a
sheet of graph paper). We usually place the independent variable along the horizontal (or x- axis), and
the dependent variable along the vertical (or y- axis.
The graphs of the functions are useful for several reasons. They allow us to read off dependent and
independent variable values. They also allow us to see trends in the functions – that is, the behaviours
of one variable as the other variable changes. Economists in particular make frequent use of graphs.
You have learned how to draw and read graphs in high school. You know the properties of the graphs
of some functions – for example, the graph of a linear function is a straight line (with slope m and y-
intercept c if the formula of the function is y = mx + c), or the graph of a quadratic function is a parabola
(which has a minimum turning point if the coefficient of x2 is positive). Later in this module we will
look at the graphs of growth and decay functions.
Here we will examine graphs of multiple formula functions. But first we will do some work with graphs
to revise their use.
Example: The graph below shows two functions – a cost and a revenue function. The independent
variable for each function is the quantity of commodity produced (in come undefined units). Both cost
and revenue functions give the dependent variable as a measure in thousands of Kina. Use the graph to
answer the questions under it.
[Note: In the diagram below, the revenue function is the straight-line function].
(a) What is the cost and revenue when the quantity produced is 6 units?
(b) Profit = Revenue – Cost. At what level of production are

(i) profits generated?
(ii) losses incurred?
(c) At what level of production is the maximum profit achieved?
(d) What class of function is the revenue function? What is its formula?
(e) Draw the graph of the profit function.
Solution: (a) Reading from the graph, when the cost is 6 units, the cost is K400,000 and
the revenue is (approximately) K450,000.
(b) (i) Profits are generated between production levels of 4 and 12 units.
(ii) Losses are incurred if production is less than 4 units, or greater than 12
units.
(c) Profit is maximised when the revenue exceeds the cost by the maximum amount. In the
diagram above this occurs at approximately 8 units of
production, and at this point the profit will be (approximately)

600,000 – 530,000 = K70,000.
d) The straight-line revenue function is a linear function. It cuts the y-axis at zero, and has
a slope (900 000 – 0)/(12 – 0) = 75,000. Therefore revenue formula (Kina) = 75 000 x
production
e)
GRAPHS OF MULTIPLE FORMULA FUNCTIONS

In mathematics, the graphs of most functions that can be represented by single formulas have simple
shapes. Linear functions have straight line graphs, and other functions have simple curve graphs.
The graph of a multiple formula function can have many links, changes of shape and gaps. Here we
look at drawing the graphs of multiple functions, and of deriving the multiple formulas from a graph
that is not a simple straight line or curve.
Example: Draw the graph of the function represented by the formula
Solution: Between and , this function is a linear, and therefore has a straight line
graph (with slope 3, and y-axis intercept 0).
Between and , the function is constant, and has value 12.
Between and , the function is a quadratic, and therefore has a parabolic

graph. We could complete the square on the quadratic, to get
20x – x2 – 88 = 12 – (x – 10)2
This parabola has a maximum turning point at and . At the

function has value zero.
The graph of the function is:
Note: This function has no discontinuities. A discontinuity is a place where the function jumps – either
in the vertical or horizontal direction. Here the graph of the first formula flows directly into the graph of
the second formula, which in turn flows directly into the graph of the third formula. We say that the
graph (and the function) is continuous.
In this next example, the function has two (vertical) discontinuities.
Example: Draw the graph of the function represented by the formula
Solution: This function has three straight-line graphs, and is drawn below:
Note: Where the function has a vertical discontinuity, it is important that it has only one value at the
breaks. In the example above, the function is defined to be 1 at the first break, and 5 at the second
break. This is forced by the specific use of the <, ≤, ≥ and > signs in the formula definitions.
2.4 FUNCTIONS AS TABLES

Table of values are used by everyone, but perhaps more often in business applications than elsewhere.
There are interest tables, repayment of loan tables, amortisation tables, etc.
A table is simply another way of look at a function that has one or two independent variables. The
entries in a table may come from observations or measurements (as in many statistical tables), or else
they may be generated by the rule or formula of a function. The following example show how a table is
generated from the formula of a function with two independent variables.
Example: Construct a simple interest table for the interest accrued from investing K100 for various
times at various interest rates.
Solution: We will use the interest rates 5%, 10%, 15%, 20% and 30% for the periods from 6
months to 3 years in intervals of 6 months.
Any entry in the table is obtained by evaluating the formula for simple interest at the
required period and interest rate. For 30 months at 15%, the simple interest on K100 will
be SI = P x R x T = 100 x 0.15 x 2.5 = (K) 37.50
[Note: 30 months = 2.5 years]
This entry would be placed in the table in the following position:
5% 10% 15% 20% 25% 30%

6 months :
12 months :
18 months :
24 months :
30 months …. …. K37.50 …. …. ….
36 months :
If we wanted to complete the table of values, the best tool would be to use a spread sheet
(as you will learn in basic information technology). If we did this, we would get the full
table.
S.I. from K100 5% 10% 15% 20% 25% 30%
6 months K2.50 K5.00 K7.50 K10.00 K12.50 K15.00

12 months K5.00 K10.00 K15.00 K20.00 K25.00 K30.00
18 months K7.50 K15.00 K22.50 K30.00 K37.50 K45.00
24 months K10.00 K20.00 K30.00 K40.00 K50.00 K60.00
30 months K12.50 K25.00 K37.50 K50.00 K62.50 K75.00
36 months K15.00 K30.00 K45.00 K60.00 K75.00 K90.00
We could use this table to quickly read off the interest from an investment. For example, K100 invested
for 18 months at 25% SI would yield K37.50 interest.
Notes:
1. We are not limited to solving problems with a principal of K100 alone. We can use a trivial
application of ratio and proportion to calculate interests for other principals. For example, the
simple interest from investing K12000 for 30 months at 15% is 120 times the SI from investing
K100 for 30 months at 15% (ie, K37.50), which is 120 x 37.50 or K4,500.
2. The advantage of a table (over a formula) is that the dependent variable values can be retrieved
quickly. The disadvantage is that only certain values are tabled. For example the simple interest
from investing K100 for 10 months at 12.8% cannot be determined from the table. To obtain
intermediate values from a table alone requires the use of an interpolation technique – such as
linear interpolation, which we will consider in the next chapter.
In the previous example the two-way table was used to present a function with two independent
variables (one was represented along the horizontal margin, the other along the vertical margin). A
more sophisticated table can be used to represent a function of one independent variable, of which the
following example is an illustration.
Example: The amount (A) to which an investment (P) grows at compound interest is given by the
formula
( )
where the investment is for n years at r (per cent) per year. [Note: You will derive compound interest
and associated formulas in a later course]. Use this formula to construct a two-way table of the amount
values for an investment of K100 for 12 years at various rates of interest from 0% to 20% in steps of
0.1%.
Solution: We will construct a table of 20 rows by 10 columns, with each row giving the whole
interest percentage part, and each column of each row giving the tenth of a percentage
increment.
For example the interest rate of 13.4% will be in the row labelled 13% and the column
labelled 0.4%.
The easiest way to construct the table is (as before) with a spread sheet. The result would
be a table such as the one below.
Notes.
1. These two-way tables are used to conserve space. A one-way table giving the same amount of
information would have 200 rows (with each row having an interest value on the left, and
investment amount on the right).
2. We indicated earlier the advantage and disadvantage of a table. Another disadvantage is that to
use the table effectively we have to understand the mathematical model behind the table. For
example, we can use ratio and proportion to find the amount to which K250 will accrue over 12
years at 17.5%, but we can not use ratio and proportion to find how much K100 will accrue to at
17.5% over 6 years. (Why? Because the accrued interest is not linear in the variable time).
Exercises
1. Use the table for compound interest above to determine the following;
(a) The amount to which K100 will accrue after 12 years at a compound interest rate of
8.7%.
(b) The amount to which K100 will accrue after 12 years at a compound interest rate of
14.3%.
(c) The amount to which K300 will accrue after 12 years at a compound interest rate of
6.5%.
(d) The amount to which K1200 will accrue after 12 years at a compound interest rate of
9.9%.
2. Use the in-built square root function on a calculator to complete the following table:
Square Root 0.0 0.2 0.4 0.6 0.8

20
21
22
Application to Linear Functions 3.1
CHAPTER 3: APPLICATIONS OF LINEAR FUNCTIONS
The simplest functions to study and use are the linear functions. These are the functions most often used
by business professionals (and in particular, managers and economists). A linear function of several
independent variables has the formula;
The simplest of these is the linear function with one independent variable, .
We will look at four applications of this function.
3.1 LINEAR DEPRECIATION

A company purchases some capital equipment, and must include the value of this equipment (as assets)
in its financial documents. Overtime the value of the equipment depreciates, until it is eventually
replaced by new equipment.
One simple method of determining that value of equipment at any point in time is to assume that its
value depreciates linearly over time. The method of doing this is illustrated in the following example.
Example: A company purchases a photocopier for K18,000. Its life length is expected to be 5
years, at which time it will have no value and another copier will be purchased. If the value of this asset
is assumed to depreciate linearly over the 5 years,
(a) find a formula for the value of the photocopier at time t.
(b) use the formula to find the value of the copier after 3 years.
(c) use ratio and proportion to demonstrate that the answer in (b) is sensible.
Solution: We will first draw an illustration of the problem and its solution:
We could solve the problem by drawing an accurate graph. Instead we will use algebraic
techniques.
(a) The linear function has the formula , where y is the residual value of the
copier (in Kina), and x is the time (in years) since the copier was purchased.
We know that initially (i.e., at ) the copier is valued at kina,

so we have: , or .
After 5 years (i.e., at ) the copier is worthless (i.e. ).

i.e. , or .
Putting these two facts together, we get , so .
Our model is therefore: .
(b) Applying this formula for time = 3 years, we get:
Value at 3 years = 18000 – 3600 x 3 = 7200 (kina)
(c) Using the ratio and proportion we could argue:
Backwards over a 5 year period the value increases from 0 to 18000 kina. Over the
last 2 years the value should have increased by 2/5 (i.e., 0.4) of this amount, or
[as before].
Exercises
1. A company purchases computer workstations for K2200 each, and they will be written off in 4
years as having no value. If we assume a linear depreciation of value;
(a) Find a formula for the residual value (y) of the workstations after x years.
(b) Use your formula in (a) to determine the value of each computer after
(i) 1 year (ii) 18 months (iii) 30 months
(c) Check your answers to (b) by using a ratio and proportion argument.
2. A company purchases a collating machine for K35000. Its expected life length is 12 years, after
which it will have no value. If we assume a linear depreciation of value,
(a) Find a formula for the residual value (y) of the collating machine after x years.
(b) Use your formula in (a) to determine the value of the machine after
(i) 2 years (ii) 4 years (iii) 9 years
Answers:
1. (a) y = 2200 – 550x (b)/(c) (i) K1650 (ii) K1375 (iii) K825
2. (a) y = 35000 – 2916.67x (b) (i) K29167 (ii) K17500 (iii) K8750
3.3 LINEAR INTERPOLATION

Linear interpolation is the problem of estimating a value between two given values when we assume that
all values lie on the same straight line.
For example, we have a function which has the known pairs of (x,y) values (3.5, 17.14) and (3.6, 18.62).
We require the value of y when under the assumption that the three pairs of values lie on the
same straight line.
A graph of the problem would be:
There are several ways we could solve this problem. We could draw an accurate graph. We could
proceed by determining the equation of the line through the two end points. We could use a ratio and
proportion argument. We could use ratio and proportion to derive a useful formula to solve the
problem. We will use the last two approaches.
Example: Use ratio and proportion to find the solution of the above problem.
Solution: [Argument 1]
3.57 is 0.7 of the distance between 3.5 and 3.6 [since ]
By a ratio and proportion argument, we would expect the corresponding y-value to be 0.7
of the distance between 17.14 and 18.62, and above 17.14. Putting this as an arithmetic
statement gives
( )
[Argument 2]
Let the unknown value be y. The (ratio) position of 3.57 relative to 3.5 and 3.6 should be
the same as the (ratio) position of y relative to 17.14 and 18. Writing this as an
arithmetic statement gives
Solving this equation for y again gives

We can use argument 2 of the last example to derive a general formula that we may use in all problems.
Substituting ( ) and ( ) for the two pairs of known coordinates in the above formula, and (x, y)
for the unknown coordinate pair, gives:
or, on solving for y we get:
( )
Notes:
1. We can memorise this formula and use it in any problem requiring linear interpolation.
Alternatively we can attempt to understand the derivation of the formula [either argument 1 or
argument 2 of the worked example above] and use this method when required. [Mathematicians
would recall going back to the basics of first principles method of solution].
2. Linear depreciation of value (ie, section 3.1) is a special case of linear interpolation.
Application to Tables of Values
One common application of linear interpolation is to overcome the problem of deducing values from
tables for input values which are not precisely given.
Example: In the last chapter we constructed a table for the amount of K100 would accrue to over 12
years at varying compound interest rates. Part of that table is reproduced here.
Interest 0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9%
Rate
: : : : : : : : : :
12% 389.60 393.79 398.03 402.31 406.63 410.99 415.39 419.84 424.34 428.87
: : : : : : : : : :
Use linear interpolation to find the value to what K100 would accrue over 12 years at 12.36% interest.
Solution: The required interest rate is not tabled. Instead we have 12.3% and 12.4%.
We could argue that because 12.36% is 0.6 the distance between 12.3 and 12.4, then our
amount should be 0.6 the distance between 402.31 and 406.63, which gives:
Amount = ( ) (kina)
Note: In this application, we know the amount at compound interest formula (it is A = P(1 + r)n . We
can use P=100, r=0.1236 and n = 12 to get the exact answer which is K404.89. Our linear interpolation
was in error by 1 toea (in K405). When used with tables of values, linear interpolation is invariably
very accurate.
Exercises
1. The following is an extract from an annuity table. The numbers in the table show how much
K100 deposited at the end of every month would grow to after various numbers of months in the
accounts bearing compound interest at various rates.
Period/Rate 10% 11% 12% 13% 14% 15%

24 2644.69 2670.86 2697.35 2724.17 2751.32 2778.81
30 3392.35 3435.08 3478.49 3522.59 3567.39 3612.91
36 4178.18 4242.31 4307.69 4374.33 4442.28 4511.55
42 5004.13 5094.97 5187.90 5282.97 5380.23 5479.73
48 5872.25 5995.62 6122.26 6252.28 6385.77 6522.84
[For example, if we deposited K100 for each month for two years (i.e., 24 months) in an account that
paid 10% interest compounded monthly, then at the end of this time we would have K2644.69 in the
account].
(a) Use linear interpolation to estimate the amount to which an annuity of K100 would grow to over
30 months at 11.6% interest.
(b) Use linear interpolation to estimate the amount to which an annuity of K100 would grow to over
42 months at 14.3% interest.
(c) Use linear interpolation to estimate the amount to which an annuity of K100 would grow to over
40 months at 12% interest.
(d) Describe how you might use linear interpolation to estimate the amount to which K100 would
grow to over 34 months at 12.2% interest.
(e) The linear interpolation between interest rates will be more accurate than the linear interpolation
between period values. Can you suggest why this might be so?
2. The following table was taken from an introductory statistics textbook. It shows the value of a
certain statistic (called chi-square) for various values of two parameters n and p.
n/p 90 95 99 99.9
20 28.41 31.41 37.57 45.31
22 30.81 33.92 40.29 51.18
24 33.20 36.42 42.98 54.05
[For example, when n =20 and p=90, then the chi-square value is 28.41].
(a) Use linear interpolation to estimate the chi-square value when n=22 and p=93
(b) Use linear interpolation to estimate the chi-square value when n=20 and p=97.5
(c) Use linear interpolation to estimate the chi-square value when n=24 and p=99.5
(d) Use linear interpolation to estimate the chi-square value when n=23 and p=95
Answers:
1. (a) K3461.13 (b) K5410.08 (c) K4894.50 (d) - (e) -
2. (a) chi-square = 32.68 (b) chi-square = 35.26 (c) chi-square = 49.13 (d) chi-square = 35.17
3.3 LINEAR EXTRAPOLATION

Linear extrapolation is mathematically the same as linear interpolation. In fact it uses the same
formula. The only difference is that the value being sought lies outside the given values rather than
between them. Here is an example.
Example: The following table gives the profits (in thousands of Kina) of a company over the
previous 4 years. Assuming that the profits are growing linearly (as seems to the case here), estimate
the profits made in 5 years’ time (i.e., for year 9).
Year 1 2 3 4
Profit 330 410 475 540
Here is a graph of the problem:
Solution: We will use the first and last date value to fix our linear function. That is, we have points
(1, 330) and (4, 540), and we wish to deduce the profit for year 9. Using the formula, we have:
y = 330 + (9 – 1) ( )
Note: Linear extrapolation is mathematically equivalent to interpolation, but its application is different,
and more care must be taken with its use. If the function being extrapolated is not linear (or it is linear
but we use the wrong slope), then as the distance to the point of extrapolation increases, the true value of
the function can begin to diverge significantly from the approximated value. In the above example,
there is a distance of 5 units to the point of extrapolation (compared to 3 units between the points being
used for the extrapolation). There is a great opportunity for the actual profit to deviate a long way from
the projected 890 thousand kina. So whereas we can be confident that a value obtained by linear
interpolation will be accurate, we must be more careful with interpreting a value obtained by linear
extrapolation.
Exercises
1. A student completed a 3000 word essay in 6.5 hours and a 4000 words essay in 8.3 hours. Use
linear extrapolation to estimate;
(a) how long it would take the student to complete a 6000 word essay.
(b) what size essay could the student complete in 10 hours.
2. After advertising that an item was being sold at a 7% discount, a company found that over the
next week they sold 256 items. When in another week the company advertised that the same
item was being sold at a 10% discount, the company sold 321 of the items. Use linear
extrapolation to estimate how many items would be sold in a week if the item was advertised as
having a 12.5% discount.
3. When adults smoke 20 cigarettes a day, a public health body estimates that their chance of
contracting lung cancer by the age of 50 is 7%. When adults smoke 30 cigarettes a day, the
chances of contracting lung cancer by age 50 is 12%. Use linear extrapolation to estimate the
chance of contracting lung cancer by age 50 if an adult smokes 45 cigarettes per day.
Answers:
1. (a) 11.9 hours (b) 4944 words 2. 375 items 3. 19.5% chance
3.4 LINEAR REGRESSION

Our final application of linear functions is from statistics. Linear regression is the problem of fitting a
straight-line function through a series of (x, y) data values.
In the diagram below we wish (for some reason) to model the date by a single straight line, and to find
the formula of that line. We have drawn by hand a line, which you will probably agree approximates
the data fairly well.
Our problem is that if 10 people all were given a graph with these points, and each asked to draw such a
“line of best fit”, each person would draw a slightly different line. We need a mathematical technique to
find the line, so that all our lines will be exactly the same.
There are several mathematical lines of best fit used. The most common is called the regression line, or
the least squares line of best fit. It is usually referred to by the formula (rather than
).
The regression line formula is built into most scientific calculators and all spread sheets. On many
calculators they are available through the keys marked a and b. In Microsoft Excel they are available
through the functions =INTERCEPT and =SLOPE. To find out how to use these, you should read your
calculator’s handbook or the spread sheet’s online help.
The formula for the slope b is complicated, and we will not consider it until a later course in statistics.
However, once we know b we can determine the value of a using the property that the regression line
passes through the point ( ̅ ̅), where ̅ is the average of the x values, and ̅ is the average of the y
values.
Example: Some students were given a mid-semester test and an end of semester examination. The
marks obtained by 10 students were;
Test (out of 20) 15 12 19 16 8 12 6 14 11 13

Exam (out of 100) 63 65 82 75 52 60 48 64 58 68
The lecturer taking this subject is interested in the linear relationship between the two sets of marks
obtained by the students.
(a) use a calculator to find the values of a and b of the regression line for this data, and hence
find the equation of the regression line,
(b) draw a scatterplot of the marks and the regression line, and
(c) show that the regression line passes through the point ( ̅ ̅)
Solution: (a) We used the ( ̅ ̅) and DATA keys on our calculator to enter the data, then pressed a to
get 31.7 and b to get 2.523. The regression line equation is therefore
(b) We have used Microsoft Excel to draw the following graph:

(c) The mean of the x-values is (15 +12 + … + 13)/10 = 12.6
The mean of the y-values is (63 + 65 + … + 68)/10 = 63.5
When x = 12.6,
So the regression line does pass through (12.6, 63.5)
Note: Once we have the regression line, we can use it to predict the value of the dependent variable for
any particular value of the independent variable. Suppose that in the last example another student scored
10 on his mid semester test, then we would predict that he would score in
his final examination. Of course, this is only a prediction. It might be accurate, or it might be rather
inaccurate!
Exercises
1. Mark in the point (12.6, 63.5) (which is called the centroid) on the graph in the example above.
2. A transport company investigated the price and wear of tyres purchased for its fleet of delivery
trucks. Over time, they purchase 6 brands and recorded how many thousand kilometres the tyres
lasted. The information is recorded in the following table:
Brand A B C D E F
Tyre Cost (Kina) 220 170 250 225 195 205
Length of Service 45 33 51 47 42 38
(a) Plot this data on a sheet of graph paper with tyre cost along the horizontal axis.
(b) Find the average cost of these 6 tyres and the average length of service of the six brands.
Plot this point (i.e., (average cost, average service)) on your graph paper.
(c) Use a calculator (or spread sheet) to find the constants a and b of the regression line
equation. Hence find the equation of the regression line, and draw it on your graph in (a).
(d) Does the regression line pass through the point (average cost, average service)?
(e) Suppose a new brand of tyre costs K230. Use the regression line to predict how many
kilometres of service the company will get out of this tyre.
3. The research division of a bank supplied the following table relating interest rates to number of
monthly loan applications to bank management.
Interest rate (%) 8% 10% 12% 14% 16% 18%

Number of 45 33 30 25 25 20
monthly loans
(a) Plot this data on a sheet of graph paper, with interest rate along the horizontal axis.
(b) Use a calculator (or spread sheet) to find the constants a and b of the regression line
equation. Hence, find the equation of the regression line and draw it on your graph in (a)
(c) Use the regression line model to predict the number of monthly loan applications if the
interest rate is 13.5%.
Answers:
2. (a) - (b) average type cost = 210.8, average service = 42667 km

(c) a = -4.39, b = 0.2232; regression line equation is y = -4.39 +0.2232x (d) yes (e) 46900 km
3. (a) - (b) a = 58.3, b = -220 ; regression line equation is y = 58.3 – 220x (c) 29 loans
Linear Inequalities 4.1
CHAPTER 4: LINEAR INEQUALITIES
An equality (or equation) is a mathematical sentence with two sides connected with an equal sign.
Examples of equalities are y = 3x – 7, 2x – 5 = 0, 2=2
Inequalities involve the use of the symbols <, >, ≤, and ≥. Some number sentences involving
inequalities are: 5 < 7, -3 > -5, 11 ≤ 11, and -6 ≥ -6. (Note: These sentences are all true!)
Linear inequalities of one or more variables contain pronumerals (i.e., variables) that are not raised to
any power. Some examples of linear inequalities with one variable are:
2x – 1 > 5 3 – 2x ≥ 5
3 < 4 – 2z 2 – t ≥ 2t + 5
Examples of linear inequalities with two variables are:
12x – 6y > 5 3 – 2x ≤ 5y +2
3w < 4.5 – z 4s + t ≥ 2t + 5
And 3x – 4y + 7z < 5 is a linear inequality with three variables.
4.1 MANIPULATING INEQUALITIES

We manipulate and simplify inequalities (and in particular, linear inequalities) in the same way that we
manipulate and simplify equalities, but with exceptions. The general rule for equalities is “whatever we
do to one side, we do to the other”. Using this rule we can add or subtract any constant to each side of
the inequality. We can also multiply or divide each side by a positive number. So the following algebra
is correct:
Example: Simply 5 + t ≥ 15 – 4t
Solution: 5 + t ≥ 15 – 4t
t ≥ 10 – 4t (subtracting 5 from both sides)
5t ≥ 10 (adding 4t to both sides)
t≥2 (dividing both sides by 2)

There are two other operations that we use every day with equalities that cannot be used so easily with
equalities. They are the operations of “switch sides” and “multiply or divide each side by a negative
number”. In performing these operations we must switch the inequality (from < to >, or from > to <).
Example: Simplify
Solution:
(switch sides, so switch inequality)

(divide both sides by 4)
Note: The reason for changing the inequality is obvious. Take any simple inequality that is true, say
. Then we could also write . That is, if we switch sides we must switch the inequality.
Example: Simplify
Solution:
(divide both sides by -4, so switch the inequality)
Note: The reason for changing the inequality sign here is less obvious. Take any simple inequality that
is true, say . Then it is true that . When we change sign, the order of the numbers
reverses. Changing signs always happens when we multiply or divide each side of an inequality by a
negative number.
Manipulating non-linear inequalities is more difficult, since multiplying or dividing each side of an
inequality by a pronumeral is complicated. If the pronumeral happens to be positive, we have no
problems. If the pronumeral happens to be negative, then we must switch the sign of the inequality.
The following example is included as an illustration only – to show how careful we must be when
manipulating a variable within a non-linear inequality.
Example: Simply
Solution:
(ie, add 3 to each side)
(ie, divide each side by 2)
( )
{ (i.e., multiply each side by x)
( )
But the problem is not over. We realise that it is impossible for if – so this is not a
solution. The solution is , but this is only so if . So the value of x that satisfy this
inequality lie between 0 and 2 (but not including 0, since is not defined at ). That is, the
solution interval is . In this problem the solution is a closed interval (see section 5.3)
Exercises
1. Simplify the following inequalities;

(a) (b)
(c) – (d)
(e) – (f) –
(g) (h)
2. Make the variable x the subject of the following inequalities:

(a) (b) –
(c) – (d) –
(e) (f) – –
(g) – (h)
Answers: (odd parts)
1. (a) (c) (e) (g)
2. (a) (c) – (e) (g) –
4.2 GRAPHICAL INTERPRETATIONS
A linear equality involving one variable can be interpreted as a point on the number line. For example,
can be illustrated as:
Linear inequalities involving one variable, such as , , , or can be

interpreted as a half number line.
represents the numbers t to the left of (but not including) , which can be illustrated as:
represents the numbers x to the right of 0 (the positive numbers), which can be illustrated as:
represents the numbers a to the right of and including , which can be illustrated as:
represents the numbers z to the left of and including , which can be illustrated as:
Notes: Where the line segment includes a number line value we use a solid large dot. Where the
line segment does not include a number line value we use an open circle. So, for
example, in diagram (e) above – the line segment includes , but does not include
.
Exercises
1. Indicate the solution of the following inequalities as a line segment:

(a) (b)
(c) (d)
(e) – (f) –
(g) (h)
A linear equality with two variables, such as 3x – 2y = 12, has a solution set that can be represented on a
sheet of graph paper as a straight line.
Example: Find one solution set of the equality 3x – 2y = 12, and draw the graph of the solution set.
Solution: By trial and error, (x,y) = (6,3) is one solution

[since ]
Making y the subject of – gives – .

The graph of this function is our solution set. ie, it is a straight line cutting the
at and having slope ). This solution is:
Note: We could write the full solution set as ( )=( ), then generate a particular solution
by selecting any value for .
A linear inequality with two variables, such as , has a solution that can be represented on
a sheet of graph paper as the half plane that is one side of the straight line that is solution of the
corresponding equality. If the inequality sign is < or > then the straight dotted line is included in the
solution. If the inequality sign is ≤ or ≥ then the straight line is included in the solution.
Example: Illustrate the solution of the inequality
Solution: We first need to select a point in one half plane. Looking at the graph of the equality (see
last example), notice that the origin (i.e., ( )) is in the upper-left half plane. This ( )
pair satisfies the inequality
[since ], so the solution is the upper-left half plane. Since the
inequality is < (ie, strictly less than), the boundary line is not part of the solution.
Note: (1) If the inequality was a ≤, then the straight line separating the half planes would be
included, and we could indicate this by drawing a thick separating line.
(2) We could choose any point to test which half plane is required. For example, we could
choose ( ). From the diagram we see that this point is in the lower-right half plane.
If we substitute this ( ) pair into the inequality we get . This
simplifies to , which is not true. This point is not in the solution half plane, so
the other half plane must be the solution.
(3) Another method of determining the solution half plane would be to make y the subject of
the inequality (here it would be . A“ ” corresponds to a region above
the line, while “ ” corresponds to a region below the line.
Exercises (cont)
1. Indicate the solution of the following inequalities as a half plane:

(a) – (b) –
(c) – (d)
(e) – (f) –
(g) (h)
4.3 COMBINING INEQUALITIES

Often in practice several inequalities operate (or must be satisfied) at the same time. When this
happens, we get a subset of the solution described and illustrated in the previous section.
Example: The following pairs of inequalities must be satisfied at the same time:
(a) and (b) and
Illustrate the solution as a closed interval on a number line:
Solution: (a) For and to both be satisfied, then x must lie between 3 and 10
(not including 3 but including 10). In short hand notation we would write this
interval as . It can be represented on a number line as
and
which gives:
(b) For t ≤ 3.5 and t ≤ -2 to both be satisfied, then t must be less or equal to -2.
and
which gives
Exercises
1. Write the following inequalities in a short hand notation, and indicate the solution of the as a line
segment:
(a) x > 0 and x < 7 (b) t > 25 and t ≤ 30
(c) x ≥ 16 and x ≤ 20 (d) a ≤ 2 and a > 0
(e) t ≤ 6 and t > -6 (f) t ≤ -4 and t ≥ -10
Answers (short hand notation of odd parts)
1. (a) 0<x<7 (c) 16 ≤ x ≤ 20 (e) -6 < t ≤ 6

When we require that two linear inequalities with one or two variables all be satisfied, the solution is
usually a quarter plane, and when we require that three or more linear inequalities be satisfied the
solution is often a closed polygon.
Example: The following inequalities must all be satisfied at the same time;
and – and and
Sketch the region that satisfies all four inequalities.
Solution:
When we analyse the half planes in the above diagram, we observe that a quadrilateral
solution is indicated and that is
Exercises (cont)
2. Indicate the solution of the following inequalities as closed polygon;

(a) x ≥ 0 and y ≥ 7 and x ≤ 5 and y ≤ 10.
(b) x ≥ 6 and x ≥ 4 and x + y ≤ 20.
(c) x ≤ 6 and y > 6 and y ≤ x + 7 and y < 10 – x.
(d) x ≥ 0 and y ≥ 0 and y < 2x + 1 and x + y < 5.
4.4 LINEAR PROGRAMMING

Linear programming is a topic in a branch of mathematics called operations research. The methods of
operations research are used in economics and management.
In linear programming, a process is modelled as a series of linear inequalities, and we aim to find the
largest (ie, best) or smallest (ie, worst) solution of the process that satisfies all of the linear inequalities.
In practice, economic models may involve using dozens of variables, and the solution technique is
clever and sophisticated. Here we will use only two variables in problems, which mean that we can use
a simple graphical technique to analyse and solve the problem.
The way we proceed is to draw a diagram of the region satisfied by all the inequalities of the problem.
The region is called the solution region. We can show that the largest and smallest value of a linear
expression involving x and y will always occur at one of the vertices of the solution region.
We will first solve a problem written in mathematical form, then take a word problem, convert it to a
mathematical model and solve it.
Example: A process has two variables, x and y. The values of x and y must satisfy the following
inequalities:
Find the values of x and y which satisfy all of these inequalities, and maximise the value of the
expression .
Solution: The region satisfying all four inequalities is the quadrilateral sketched below.
The largest or smallest value of a linear expression involving x and y (here ) will always occur at
one of the vertices of the solution region. We see that our region has four vertices, which can be found
by solving pairs of simultaneous equations. The four vertices are (0,2), (0,5.8) , (2,2) and (1,5). When
we substitute these pairs of values into the expression . We get (respectively) 2, 5.8, 14, and 16.
We see that the smallest value is 14, and the largest is 16. The answer to our problem is 16.
Notes:
1. If we select any point in the solution region on the graph and calculate , we will get a
value between 0 and 16. This illustrates our statement that the largest and smallest value of the
linear expression always occurs at a vertex of the solution polygon.
2. An alternative way to find the largest or smallest solution is to draw the line on the
graph, then mentally slide it right and left. Your tutor may show you how this method works.
Example: A small furniture company makes tables and chairs. The process involves constructing
and finishing (eg, painting, etc) the items. The following table shows on average how long it takes the
company’s employees to construct and finish an item:
Task Tables Chairs
Construction 2 hours 0.8 hours
Finishing 1.5 hours 1.2 hours
The company can sell every item it makes, and will make a profit of K80 on each table and K30 on each
chair. The company operates for 12 hours each day.
How many tables and how many chairs should the company aim to produce a day, and what will be the
maximum daily profit?
Solution: We first need to construct inequalities describing the constraints of this factory. We will
let x be the number of tables produced daily, and y be the number of chairs produced
daily. We know that they cannot produce a negative number of tables or chairs. So
and . Now if we produce x tables and y chairs in a day it will take
hours to construct them (why?). So . Similarly it will take
to finish them (why?). So .
Finally, if we produce x tables and y chairs in a day, our profit will be . So we

need the maximum value of this expression.
Summarising this, we have:
find the maximum value of
If we draw a graph of the inequalities we find that the solution region for this problem is:
There are four vertices (found by solving sets of simultaneous equations) of the solution region.
They are (0, 0), (6, 0) (0, 10), and (4, 5). At these productions the daily profit is (respectively)
K0, K480, K300 and K470.
The company should produce 4 tables and 5 chairs each day, and it can make a profit of K470
per day. [Note: Unless if it doesn’t want to produce the chairs, it can still make the maximum
profit of K480].
Exercises
1. Find the maximum value of x + 2y, if the following inequalities must each be satisfied:
x ≥ 0 and y ≥ 0 and x + y ≤ 6.
2. Find the maximum value of 4x + 3y, if the following inequalities must each be satisfied:
x ≥ 0 and y ≥ 0 and 2x + 3y ≤ 6 and 4x + y ≤ 4.
3. Find the maximum value of 2x + 5y, if the following inequalities must be satisfied:
x ≥ 0 and y ≥ 0 and 3y – 2x ≤ 6 and 7x – 2y ≤ 14 and x + y ≤ 5.
4. A company makes two size cooking pots. Each large pot require 20 cm3 of metal and two
handles, while the small pot require 15 cm3 of metal and one handle. The company’s machine
for processing the metal can produce 1500 cm3 of metal for making pots per day. The machine
for processing handles can produce up to 120 handles per day. The company makes a profit of
K15 for each large pot made and K10 for each small pot made. If the company can sell every
pot it makes, how many of each (large and small) should it make to maximise its profits?
5. A group of villagers have 40 hectares of land that they can use to plant some produce. A
University graduate amongst them estimates that if they plant coffee they can make a profit of
K2000 per hectare per year. If they plant vegetables they can make K6000 per hectare per year.
Each hectare of planted coffee requires 2 men/women per day labour, while each hectare of
vegetables requires 8 men/women per day labour. There is a labour force of 120 men and
women. How much of the land should be planted with coffee and how much with vegetables in
order that the villagers maximise their profits?
Answers:
1. 12 (when x = 0 and y = 6) 2. 7.2 (when x = 0.6 and y =1.6)

3. 19.6 (when x = 1.8 and y = 3.2) 4. K1050 (30 large pots and 60 small pots per
day)
5. K106680 (33.33 ha coffee and 6.67 ha vegetables)
Logarithms 5.1
CHAPTER 5: LOGARITHMS
Many problems in financial mathematics involve manipulating and solving expressions containing
indexes. The laws of indices provide many of the results that you will need for this task. In this chapter,
we will revise techniques for solving equations involving indices; then introduce logarithms, which will
add a further useful technique. The results of this chapter are used in the second semester subject
“Financial Models”.
5.1 SOLVING INDEX EQUATIONS FOR THE BASE

We can solve an equation of its base by using the properties of indices.
Example: Solve x2.3 = 35
Solution: We must raise each side to the reciprocal of the index, that is
( )
Therefore x = 4.6917 (since )
Note: You should check this solution by substituting x = 4.6917 into the original equation.
Exercise Set 2.1
1. Find the value of the pronumeral in each of the following

a) x4 = 0.4096
b) x7 = 12.43047
c) 10x -1.5 = 1.25
d) p-8 – 40 = 24
2. Make x the subject of the following formula

a) y = (x-2)8 + 7
b) A = 102 (1+x)7
Answers:
1. (a) 0.8 (b) 1.4334 (c) 4 (d) 0.5946

2. (a) x = 2 + (y-7)1/8 (b) x = (A = (A/102)1/7 - 1
Logarithms 5.2
5.2 SOLVING SELECTED INDEX EQUATIONS FOR THE INDEX

For certain selected problems we can solve an index equation for the index also using properties of
indices. If both sides of the equation (where a and b are constants) can be written in terms of
the same base, then we can solve for x.
Example: Solve for x.
Solution: First move the 5 to the right hand side: 2x+l = 80/5 = 16
Next write 16 as a power of the same base (2): 16 = 24
So we can express both sides of the equation as a power of 2, ie: 2x+1 = 24
Since both sides are expressed as powers of the same base, we can equate exponents:
x + 1 = 4, so x= 3.
Note: You should check this solution by substituting x = 3 into the original equation.
Exercise Set 2.2
1. Solve the following equations by expressing each side as powers of the same base.
(You will not need to use a calculator)
(i) 2x = 32 (ii) 2x-1 = 0.25
(iii) 3x+-1 = √3 (iv) 5t =1/125
(v) 2a = 0.125 (vi) 3x+1 + 81
2t+1
(vii) 5 = 12.5 (viii) (0.5)x = 16
(ix) 3x+4 = 1/27 (x) 0.125 = 21-x
x-1
(xi) 30 x 2 = 240 (xii) 112t-1 = 1/121
Answers:
1. (i) x = 5 (ii) x = -1.5 (iv) t = -2 (v) a = -3 (vi) x =3

(vii) t = 1 (viii) x = -7 (x) x = 4 (xi) x = 4 (xii) t = 0.54
Logarithms 5.3
5.3 DEFINITION OF A LOGARITHM

The logarithm of a number is defined to be the index to which a base must be raised to get the number.
If the base is 10, we get the common logarithm.
If x = 10y then y = log(x)
We can immediately observe that x must be positive (since 10y is always positive).
That is, we can only find the logarithm of a positive number.
The common logarithm of a number can be found with a calculator or a spread sheet. On a calculator,
the log key gives the common logarithm of any positive number. On a spread sheet, the = log ( )
function gives the common logarithm of any positive number.
Example: Use a calculator to find the common logarithm of

(a) 53.7 (b) 0.0245
Solution: (a) The sequence log 53.7 = gives 1.72997

[ie, the logarithm of 53.7 is 1.7997]
(b) The sequence log log 0.0245 = gives -161083
[ie, the logarithm of 0.0245 is -1.61083
In some special cases we can use the boxed definition above to deduce the logarithm of a number.
Example: Use the boxed definition above to find the common logarithms of the following positive
numbers:
(a) 100 (b) 1000 (c) 0.1
Solution: (a) Since 100 = 102 , the logarithm of 100 is 2 [ie, log(100) = 2]
(b) Since 1000 = 103, the logarithm of 1000 is 3 [ie, log(100 = 3]
(c) Since 0.1 = 10-1, the logarithm of 0.1 is -1 [ie, log(0.1) -= -1]
Note: The use of the log key on your calculator will verify these values.
Logarithms 5.4
There are many “logarithms”. Another logarithm (called the natural logarithm) is also programmed into
scientific calculators via the ln key. For the natural logarithm, the base we use in the number 2.71828
….. [which is called e]. In this course we will use the convention that the single word “logarithm”
means “common logarithm”.
Exercises
1. Using the definition of the (common) logarithm above, and without using your calculator, write
down value of each of the following, and check each answer using a calculator:
(i) log (10) (ii) log (1000)
(iii) log (√10) (iv) log (100.25)
(v) log (0.01) (vi) log (1)
(vii) log (10√10) (viii) log (0.000001)
2. (a) Use your calculator to evaluate

(i) log (1.4361) (ii) log (143.61) (c) log (14361)
(b) Describe the pattern you observe?
(c) Use the pattern in (b) to write down (i) log(1436.1) and (ii) log(143610).
3. Use the definition of a logarithm (ie. Result (1) above) to explain why
(a) common logarithms of positive numbers less than 1 are negative
(b) common logarithms of negative numbers are impossible (i.e. undefined).
Answers:
-2 -6
1. (i) 1 (ii) 3 (iii) ½ (iv) (vi) 0 (vii) 15 (viii)
2. (a) (i) 0.1572 (ii) 2.1572 (iii) 4.21572
(c) (i) 3.21572 (ii) 5.21572
Logarithms 5.5
5.4 PROPERTIES OF LOGARITHMS

By using the logarithm definition, and the laws of indices, we can derive several results involving
logarithms. These results are true for positive values of a and b (c and n can be any values).
10log(a) = a
log (10c) = c
Log(ab) = log(a) + log(b)
Log(a÷b) = log(a) – log(b)
Log(an) = nlog(a)
The second result was used in question 1 of the last exercise set, and the third result in question 2 of the
same set. Before the time of calculators if was the third and fourth results that enabled school students
to multiply and divide complicated numbers.
We will not derive or prove these results here, but will show that they work by example. Derivations
and proofs may be found in most college level mathematics text books.
Example: Show that (a) 10log(5) = 5 (b) log (10-0.73) = -0.73
Solution: (a) Using a calculator, log(5) = 0.69897, and 100.69897 = 5

(b) Using a calculator, 10-0.73 = 0.186209, and log(0.186209) = -0.73
Example: Select two positive numbers, and use a calculator to demonstrate that the results
log(ab) = log(a) + log(b) and log (a÷b) = log(a) – log(b) are true for those numbers.
Solution: Choose (say) a = 1.2005 and b = 0.572.
Using a calculator:
log(ab) = log(1.2005 x 0.572)
= log(0.686686)
= -0.16324
log(a) + log(b) = log(1.2005) + log(0.572)

= 0.07936 + -0.24260
= -0.16324
log(a÷b) = log(1.2005 ÷ 0.572)

= log(2.09878)
= 0.32197
log(a) – log(b) = log(1.20050) – log(0.572)

=0.07936 – (-0.24260)
= 0.32197
Logarithms 5.6
Example: Select two numbers, and use a calculator to demonstrate result

Log(an) = nlog(a) is true for these numbers.
Solution: Choose (say) n = 3.7 and a = 147.6
Using a calculator:
log (an) = log(147.6-3.7)

= log(0.0000000094272)
= 8.02562
nlog(a) = -3.7 x log(147.6)

= -3.7 x 2.16909
= -8.02562
Exercises
1. Verify that each of the following is true for the values of a, b, c and n given underneath:
10log(a) = a
log (10c) = c
log(ab) = log(a) + log(b)
log(a÷b) = log(a) – log(b)
log(an) = nlog(a)
(a) a = 13.3, b = 0.086, c = 5.3, n = 12.5

(b) a = 0.00045, b = 937, c = -0.253, n = -12.5
The following questions are optional, and allow you to see how proofs of some of the above results in
this section are obtained.
2. Complete the following to prove the result log (10c) = c

Let 10c = b (call this *)
By definitions of logarithms, therefore c = ….. (call this result **)
Take logs of both sides of *. ie, log(10c) = ….. (call this ***)
Comparing results ** and *** (ie, eliminate log(b)) and you get the result.
3. Complete the following to prove the result log(an) = nlog(a)

Let log(an) = b (call this *)
By definitions of logs, therefore an = …..
Raise both sides to power 1/n, therefore (an) 1/n [= a] = …….
Take logs of both sides, therefore log(a) = …..
Make b the subject of this last equation (call this result **)
Comparing results ** and ** (ie, eliminate b) and you get the result.
Logarithms 5.7
5.5 SOLVING AND EQUATION FOR THE INDEX

The final result of the last section (ie, log(an) = nlog(a)) can be used to remove indices from a logarithm
expression involving indices. Here is an example.
Example: Remove the index from the expression log(1.025n)
Solution: The result log(an) = nlog(a) indicates that we can move the index to the front of the
sentence as a multiplier. That is, nlog(1.025)
It is this property (ie, of removing an index) that makes this result very useful in the following example
that we use the result to solve index equations for the index.
Example: Solve 3x = 20 for x
Solution: Take logarithms of both sides: log(3x) = log(20)

Now use the power rule on the left side x log(3) = log(20)
Hence x = log(20) log(3)
= 1.30103 0.47712
= 2.7268
Note 1: We can use a calculator to find 32.7268. It is 19.9992. The difference between this and 20
was caused by the fact that we rounded off log(20) ÷ log(3) to 5 significant digits.
Note 2: If the base is 10, then we can solve the index equation directly using the definition of
logarithms. For example, to solve 10x = 7 for x, by definition x = log(7) [= 0.84511]
As well as solving equations, we can use logarithms to make the index the subject of the formula
containing it, as in the following example.
Example: Make p the subject of the following formula 100(1+r)p = 20
Solution: Re-arrange the formula, then take logarithms of both sides, then remove the index from
the left side:
(1+r)p = 0.2
log(1+r)p = log(0.2)
plog(1+r) = log(0.2)
p = log(0.2) ÷ log(1+r)
-0.69897
log(1+r)
Logarithms 5.8
Exercises
[In each of the following, where possible you should check your answer by substituting it into the
original equation].
1. Solve the following equations for the unknown

(a) 5x = 8
(b) 17x = 3.5
(c) 32t+1 = 16
(d) 122t+1 = 3.75
(e) (0.45)x = 10
(f) (0.3333)x = 0.14
2. Solve the following equations for the unknown (using the definition of the logarithms)
(a) 10x = 5.7
(b) 102x-1 = 15.8
(c) 104-7t = 5
3. Make n the subject of the following formula.

(a) 4n = A
(b) F = (1+r)n
(c) A = 12.3 x 1.07n
Answers:
1. (a) 1.292 (b) 0.442 (c) 3.524 (d) -0.234 (e) -2.884 (f) 1.789
2. (a) log(5.7) [=0.756] (b) (log(15.8)+1)/2 [=1.099] (c) (4-log(5))/7 [=0.472]
3. (a) n=log(A) log(4) (b) n=log(F) log(1+r) (c) n=log(A ) log(1.07)
Exponential Functions 6.1
CHAPTER 6: EXPONENTIAL FUNCTOINS
Two frequently used classes of functions have formulas of the type and . Their
formulas look similar, but their properties and applications are very different.
Functions with the formula are called power functions. In this formula, x and y are
variables, and a and b are constants. There is a restriction – x must be positive. Ratio and proportion
relationships are examples of power functions. For example, direct proportion is an application of the
function , inverse proportion is an application of the function , square proportion
is an application of the function , inverse cube root proportion is an application of the
⁄
function , etc..
Functions with formula are called exponential functions. In this formula, x and y are
variables, and a and b are constants. There is a restriction - b must be positive. These functions are also
called growth and decay functions, both because of their shape and because they occur in many
applications involving growth or decay of quantities over time [some examples might be the reducing
value of money over time under inflation (a decay function) or the natural increase in population over
time (a growth function), the cost of an item over time under inflation (another growth function)].
6.1 GRAPHS OF EXPONENTIAL FUNCTIONS
In the following examples we plot some values of two exponential functions, draw their graphs, and
look at some of their properties. Following these examples we will generalise the results to all
exponential functions – although demonstration of these results are left as exercises. We will only look
at examples where the value of the constant a is positive (and note the behaviour of functions with
negative values of a in section 6.4).
Example: (a) Plot the value of y = 3.2 x 1.8x for the x = 4, -2, 0, 2 and 6.
(b) Use these values to draw the graph of this function.
(c) Where does the graph cut the y-axis?
(d) What happens to y when x gets smaller and positive, and when x gets larger and
negative?
Solution: (a) We have used a calculator to fill in the following table
x -4 -2 0 2 4 6
y 0.304832 0.987654 3.2 10.368 33.59232 108.8391
(b) From our general knowledge about graphs of functions, we can predict that the graph
of this function will be a smooth curve passing through these points. The graph is:
(c) This graph cuts the y=3.2 (which is the value of the constant a in the formula).
(d) From the graph it would seem that the function heads towards y=0 as x gets
smaller and negative. And it seems that the function is growing (to infinity) as x
gets large and positive.
Note: This function is called a growth function. It starts at y=0 on the left, and grows ever
increasingly quickly as x gets larger, is often. The relative growth is constant for all values of x. For
example, the growth from x = -2 to x=0 is 3.2 – 0.9876 = 2.2124.
The relative growth in this interval is 2.2124 ÷0.9876 = 2.240. If we take any other interval of the same
size the relative growth will also be 2.240. We will take x=4 and x=6. The relative growth here is
108.84 – 33.59) ÷ 33.59 = 2.240.
Example: (a) Plot the values of y = 12.2 x 0.6x for the x=-6, -4, -2, 0, 2 and 4.
(b) Use these values to draw the graph of this function.
(c) Where does the graph cut the y-axis?
(d) What happens to y when x gets large and negative, and when x gets large and
positive?
Solution: (a) We have used a calculator to fill in the following table
x -6 -4 -2 0 2 4
y 261.5 94.1 33.9 12.2 4.4 1.6
(b) From our general knowledge about graphs of functions, we can predict that the
graph of this function will be a smooth curve passing through these points. It is.
The graph is:
(e) This graph cuts the y-axis at y = 12.2 (which is the value of the constant a in the
formula).
(f) From the graph it would seem that the function heads towards y=0 as x gets large
and positive. And it seems that the function is growing (to infinity) as x gets
small and negative.
Note: This function is called a decay function. It starts of at infinity on the left, then decreases ever
more slowly as x gets larger. The relative decay is constant for all values of x. For example, the decay
from x=-4 to x=-2 is 33.9 – 94.1 = -60.2. The relative decay in this interval is -60.2÷94.1 = (-)0.64. If
we take any other interval of the same size the relative decay will also be 0.64. We will take x=0 and
x=2. The relative decay here is (4.4 – 12.2 ÷ 12.2 = (-)0.64.
Properties of Exponential Functions
All exponential functions have the shape illustrated by the previous two examples. If we write the
function in the form , then:
 All exponential functions cross the y-axis at y=a.

 If a is positive and b˃1 then the function grows from zero on the left to infinity on the right
 If a is positive and 0˂b˂1 then the function decays to zero on the right from infinity on the left
 If b=1 there is no growth or decay – the function is a horizontal straight line
 The rate of increase of growth or decay depends on the size of b. The further away b is from b=1,
the faster the growth or decay.
 For any two coordinates ( ) and ( ) on an exponential function, the value depends
only on the distance between ( ) and ( ) it is constant for different values of ( ). In other
words, the relative growth or decay of an exponential function is constant.
Exercises
1. Construct a table of values (using a spread sheet) for the following functions at the x values
-4, -2, 0, 2, 4, 6, and 8, and use these values to draw the graph of the function:
(a) y = 16 x 1.13x (b) y = 16 x 1.4x

(c) y = 16 x 1.2x (d) y = 16 x 1.5x
2. Construct a table of values (using a spread sheet) for the following functions at the x values
-4, -2, 0, 2, 4, 6, and 8, and use these values to draw the graph of the function:
(a) y = 180 x 0.98x (b) y = 180 x 0.95x

(c) y = 180 x 0.85x (d) y = 16 x 1.5x
3. For the following functions determine the relative change of the y values between the x values
and and between and . [ie, calculate ]
(a) y = 5 x 0.9x (b) y = 18 x 1.7x
4. Repeat question 3 for and and between and (an interval of 7)
Answers:
3. (a) 0.9, -0.9 (b) 1.89, 1.89

4. (a) -0.5217, -0.5217 (b) 40.03, 40.03
6.2 BUSINESS APPLICATIONS

Exponential functions frequently occur in science, engineering and business. One application in
business and economics is to situations where the rate of inflation is constant. The following examples
illustrate this. The first is a growth function, and the second is a decay function.
Example: Suppose inflation is running at a constant 12% per annum. At this start of 2002 the price
of an item is K464.
(a) Find the expected price of this item at the start of the years 2003 to 2008.
(b) Draw a graph of the price of this item at these points in time.
(c) Find the function which has the y-values (ie, prices) observed in (a).
(d) Draw the graph of the function in (c).
Solution: (a) After 1 year (ie, at the start of 2003), we would expect the price to have risen by
the constant inflation rate, ie 12%. The new price should be (in Kina)
464 + 12% x 464 = 464 + 0.12 x 464

= 1.12 x 464
= 519.68
After the second year (ie, at the start of 2004, the price should have risen by
another 12%. The new price should be
519.68 + 12% x 519.68 = 1.12 x 519.68 = 582.04
We have repeated these calculations and placed the results in the following table:
Year 2002 2003 2004 2005 2006 2007 2008

Price 464 519.68 582.04 651.89 730.11 817.73 915.86
b)
(c) At the start of 2002, P = 464

At the start of 2003, P = 464 x 1.12
At the start of 2004, P = 464 x 1.12) x 1.12 = 464 x 1.122
At the start of 2005, P = (464 x 1.122) x 1.12 = 464 x 1.123
A pattern is evident. If x is the number of years between any year and the start of
2002, then P(x) = 464 x 1.12x. This is an exponential function with a=464 and
b=1.12.
(c) The graph of P(x) looks like:
Note: In the last example, if we are only interested in the expected price at the beginning of any year,
then we would restrict the values of x (ie, the domain) to be integers.
Example: Suppose inflation is running at a constant 12% per annum. For K100 at the start of 2002,
we could expect to purchase 40 cans of a particular tinned fish.
(a) How many cans could we expect to purchase with K100 at the start of the years 2003 to
2008?
(b) Draw a graph of the purchasing power of this K100.
(c) Find the function which has the y-values observed in (a).
(d) Draw the graph of the function in (c).
Solution: (a) At the beginning of 2002, tinned fish cost K100/40 = K2.50 per can. After 1 year (ie,
at the start of 2003, we would expect the price to have risen by the constant inflation rate,
ie 12%. The new price should be 1.12 x 2.50 = 2.80 (Kina). At this price, K100 would
purchase 100/2.8 = 35.714 cans. [Note that purchasing power of our K100 has decreased
by the fraction 35.714 ÷ 40 = 0.8929, which is 1 ÷ 1.12].
At the beginning of 2003 we can show using a similar argument that because we would
expect the price of a can of fish to increase by another
12%, then the purchasing power decreases by a further ratio of 0.8929, meaning
that K100 would purchase 35.714 x 0.8928 = 31.885 cans.
These calculations have been continued in the table below, which shows that
number of cans that would be purchased with K100.
Year 2002 2003 2004 2005 2006 2007 2008

# cans 40 35.7 31.9 28.5 25.4 22.7 20.3
(b)
(c) At the start of 2002, y = 40

At the start of 2003, y = 40 x 0.8928
At the start of 2004, y = (40 x 0.8928) x 0.8928 = 40 x 0.89282
At the start of 2005, y = (40 x 0.89282) x 0.8928 = 40 x 0.89283
A pattern is evident. If x is the number of years between any year at the start of
2002, then y(x) = 40 x 0.8928x.
(d) The graph of y(x) looks like:
Notes:
1. In this graph x is 0, 1, 2, … 7 (not 2002, 2003, 2004, … 2009). Ie, x = year – 2002.
2. Over the short period of this function, the graph looks as though it is almost a straight line. If we
were to make the span of years longer we would get the typical decay curve shape.
Exercises
1. The population of a town increased at a constant rate of 6% per year. The population at the start
of 2002 is 14000.
(a) Calculate the population of the start of the next 8 years.
(b) Draw a graph of population against year.
(c) Determine a function which describes the population in year x.
(d) Use (c) to explain why this is a “growth” function.
2. Suppose inflation is running at a constant 15% per annum. At the start of 2002, the price of a 4
wheel drive twin-cab diesel motor vehicle is K75,000.
(a) Find the expected price of this item at the start of the years 2003 to 2008.
(b) Draw a graph of the price of this item at these points in time.
(c) Determine the function which describes the price of this vehicle each year.
3. Suppose inflation is running at a constant 8% per annum. For K100 at the start of 2002 we could
expect to purchase 20 packets of coffee.
(a) How many packets could we expect to purchase at the start of the years 2003 to 2030 for
this same amount of money?
(b) Draw a graph of the purchasing power of this K100.
Find the function which has the y-values observed in (a).
6.3 USING A COMMON BASE

There are several important constants in mathematics, each characterised by having its own symbol.
(pye) is the most famous. (3.14157) is the ratio of the circumference to the diameter of a circle.
Another constant, represented by e, is called the base of natural logarithms. It is programmed into
scientific calculators through the exponential function y = ex.
The value of e can be determined from a scientific calculator by evaluating e1. If you try this on your
calculator, you will get (depending on the accuracy of your calculator) a number like
2.7182818284590452353602874713527. e is an irrational number, and so has a decimal expansion that
does not terminate. We would usually approximate e to 2.718
The constant e is particularly important and useful in calculus, though we will see it in a later course on
financial mathematics. We use it with exponential functions to standardise the exponential function’s
base. It works like this.
Any positive number c can be written as ek. For example, 2 = e0.6931, 0.3 = e-1.204, and
9.5805
14479 = e . We can find the index k for any number c using the result:
If c = ek, then k = 1n(c), where 1n is the natural logarithm function

Note: The natural logarithm function (1n) is programmed into your calculator.
Example: Find the index k so that ek = 0.3
Solution: ( )= (using a calculator) -1.20397
Instead of using the formula y = a x bx to represent an exponential function, the formula is often written
using the number e as the base. In this form, the formula becomes . [All we have done is to
k
replace b with e ]. The following results are true from the laws of indices:
If b < 1 (ie, a decay function), then k < 0

If b > 1 (ie, a growth function), then k< 0
If b = 0) ie, a constant function), then k = 0
Example: Write the exponential function formula y = 2.3 x 1.15x using the standard base e.
Solution: Using a calculator, 1n(1.15) = 0.1398 So e0.1398 = 1.15

Hence y = 2.3 x e0.1398x
Note: The formula y = 2.3 x e0.1398x represents a growth function since the coefficient of x (ie, 0.1398)
is positive.
In the next example we investigate a function written in this standard base form.
Example: (a) Draw the graph of y = 35 x e-1.2x between x = 0 and x = 8 to verify that this is the
formula of a decay function.
(b) Write the formula of this function in the form y = a x bx
Solution: (a) The function will be a decay type since the coefficient of x is negative.
The following table of values for the function has been determined using a
spread sheet.
x 0 1 2 3 4 5 6 7 8
y 35 10.54 3.17 0.956 0.288 0.086 0.026 0.008 0.002
The graph of this table of values with a smooth curve drawn through the points is shown
on the next page.
(b) y = 35 x 0.3012x (using a calculator, e-1.2x = 0.3012)
Notes: k = -1.2 and b = 0.3012. (This agrees with the statement “b<0 then k<1”)
The graph is a decay function (which we would expect if k<0 (or b<1))
The graph cuts the y-axis at a=35 (which is a property of exponential functions).
Exercises
1. Write each of the following numbers in the form ek (ie, find the value of k).
(a) 1.6 (b) 23.5 (c) 150 (d) 3463
(e) 0.95 (f) 0.14 (g) 0.05 (h) 0.00037
2. Construct a table of values for x = -2, 0, 2, 4 and 6 for each of the following functions, then draw
a graph of the function by drawing a smooth curve through the points.
(a) y = 3 x e1.25x (b) y = 5 x e-2.85x
Answers: (odd parts)
1. (a) 0.47 (c) 5.01 (g) -2.996

6.4 POSTSCRIPT
Negative Values of the Constant a
Most exponential functions in business occur in the form y = a x bx (or y = a x ekx), with a positive. All
of the examples and exercises in this chapter have been for functions of this type. The constant a can be
negative. The effect is to invert (or turn upside down) the graph of the function. So a growth function
grows downwards, while a decay function decays from a lower value. In all instances, the constant a
gives the y –axis intercept value.
Adding a Constant c
We can also add a constant to the function, giving y = a x bx + c (or y = a x ekx + c), with c taking any
value. The effect on the function is to raise or lower its values. So a growth function grows from a
starting value of c (rather than from zero) which a decay function decays to c (rather than to zero). The
function no longer cuts the y-axis at a – instead it cuts it at a + c.
The Straight Line Laws
We can take logarithms of each side of the formula of an exponential function, and then apply the rules
of logarithms. When we do this (we will not do it here), we get a transformation formula of the type
log(y) = A + Bx, where A and B are constants. This is of the same form as the simple formula y=mx+ c,
which is a linear function. The implication is that we can convert any exponential function to a linear
function by taking logarithms. This fact is often referred to as the “straight line laws”. [If you see a
straight line graph in an economics book, but one variable is a logarithm, then the function being
graphed is in fact an exponential function].
Boolean Algebra 7.1
CHAPTER 7: BOOLEAN ALGEBRA

Database computer packages store data. The effective use of the retrieval capabilities of a database
package requires a basic understanding of Boolean Algebra. This chapter gives an introduction to
Boolean Algebra, and how the ideas are used with information retrieval.
Boolean Algebra belongs to a branch of mathematics called “discrete mathematics”.
7.1 TRUTH and FALSITY
Boolean Algebra is about the truth or falsity of statements.

[Note: In Boolean Algebra, statements are often termed propositions].
Some statements are by nature either true or false. Here are some examples;
“Today has 24 hours”, which is a TRUE statement.

“There are not 60 minutes in each hour”, which is a FALSE statement.
“3 is an even number”, which is also a FALSE statement.
Other statements are (in general) indeterminate, but in a particular situation may be either true or false.
Here are some examples:
“Today is a Sunday”
“This month does not have 30 days”
“5x – 4 = 11”
“Today is a Sunday” is FALSE if today is Tuesday, but TRUE if today is Sunday. Similarly “This
month does not have 30 days” is TRUE if this month is March, but FALSE if this month is April. And
“5x – 4 = 11” is TRUE if the value of x is 3, but FALSE if the value of x is 12.
It is the truth and falsity of these indeterminate statements, and combinations of these indeterminate
statements, that prove useful in computing = and particularly in retrieving information from computer
databases.
Exercises
Give a situation in which each of the following statements is TRUE, and another situation in which the
same statement if FALSE;
(i) This is a colour printer.
(ii) Jimmy passed all of his examinations.
(iii) 10x2 = 250.
Boolean Algebra 7.2
7.2 NEGATION
Negation in Boolean Algebra means the opposite. The negation of TRUE is FALSE, and the negation
of FALSE is TRUE.
Every statement has a negation. If a statement is by nature true or false, then the concept of negation is
easy to understand. For example, “A straight line is the shortest path between two points” is a TRUE
statement and its negation would be “A straight line is not the shortest distance between two points”
(which is FALSE). But with indeterminate statements we must be more precise with our definition of
negation. For two statements (say S1 and S2), we define negation as follows:
If S2 is TRUE whenever S1 is FALSE,

and S2 is FALSE whenever S1 is TRUE,
then S2 is the negation of S1.
Note: There is symmetry about negation. If S2 is the negation of S1 then S1 is also the negation of S2.
To see why we need this complicated definition; consider the two statements “Today is Tuesday” and
“Today is Wednesday”. Suppose today was a Tuesday. Then the first statement is TRUE, and the
second is FALSE. Perhaps today is a Wednesday. Then the first statement is FALSE and the second is
TRUE. It seems the second statement is the negation of the first. But consider the possibility that today
is a Friday. In this case both statements are FALSE. By our definition, the second statement is not the
negation of the first statement.
The negation of “Today is Tuesday” is “Today is not Tuesday”. The first statement is TRUE if today is
a Tuesday, and in this case the second statement is FALSE. The first statement is FALSE whenever
today is not a Tuesday, and in all of these cases the second statement is TRUE.
A more complicated example is finding the negation of “x < 7”. We might think that the negation is
“x > 7”. (Because when x < 7 is TRUE then x > 7 is FALSE, and when x < 7 is FALSE then usually
x > 7 is TRUE). But there is a single case where both statements are FALSE – when x has the value 7.
So the second statement is not the negation of the first statement. [The actual negation is “x not < 7”,
which we would usually write as “x ≥ 7”].
To demonstrate that one statement is the negation of another, we just examine all possible situations in
which the statements might apply. In each of these situations we examine their truth/falsity. If in every
situation the truth/falsity of the statements is opposite, then each is the negation of the other. If we can
find one situation where both statements are true or one situation where both statements are false, then
neither statement is the negation of the other.
Boolean Algebra 7.3
Example: (1) Show that the statement “There are more than 20 students in the class” is not the
negation of “there are less than 20 students in the class”.
(2) Show that the statement “There are 20 or more students in the class” is the negation
of “There are less than 20 students in the class”.
Solution: (1) Suppose there are exactly 20 students in the class. Then “There are less than 20
students in the class” is a FALSE statement. “There are more than 20 students in the
class” is also a FALSE statement. Hence the first statement is not been the negation of
the second.
(2) If we consider the pair of statements “There are less than 20 students in the class”
and “There are 20 or more students in the class”, then for every possible situation if one
of these statements is true then the other is false, and vice versa. This is demonstrated in
the following table:
Number of Truth/falsity of statement: Truth/falsity of statement:

students in “There are less than 20 “There are 20 or more
class students in the class” students in the class”
1 TRUE FALSE
2 TRUE FALSE
: : :
19 TRUE FALSE
20 FALSE TRUE
21 FALSE TRUE
: : :
Note: There is usually more than one way to express a statement (and hence the negation of a
statement).
For example, the following 3 statements are logically equivalent:
“There are 20 or more students in the class”

“There are not less than 20 students in the class”
“There are more than 19 students in the class”
By logically equivalent we mean that in any situation the statements are either all TRUE or they are
FALSE. There is no situation where one is (say) FALSE while another is TRUE.
Negation in Language
In English, the word we use to express negation is “not”. So the negation of “The world is round” is
“The world is not round”. In almost every situation, placing the word not in the appropriate part of a
statement turns the statement into its negation.
The word we use to express negations in mathematics, logic and computing is also NOT. NOT TRUE
is FALSE, and NOT FALSE is TRUE.
Boolean Algebra 7.4
We can extend this negation argument in the following manner. Something that is NOT NOT TRUE
will be TRUE, while something that is NOT NOT FALSE will be FALSE. Something that is
NOT NOT NOT TRUE is FALSE and so on.
Negation in Mathematics
“x = 4 – y” is an algebraic indeterminate statement. It is TRUE if x=1 and y=3, but is FALSE if, for
example, x=0 and y=10.
The negation of “x = 4 – y” is “x not = 4 – y”. We can argue this by noting that any values of x and y
that are solutions of the equation (ie, make the first statement TRUE) make the second (not =) statement
FALSE, and any values of x and y that are not solutions of the equation make the second statement
TRUE.
The “not =” is usually written as “≠”, and ≠ is the negation (symbol) of =.
We can pair all the common symbols in the standard mathematical connection symbols with their
negations, as has been done in the following table:
Arithmetic = < > ≠ ≥ ≤

Symbol
Negation of ≠ ≥ ≤ = < >
Symbol
Using this information, we can state that
the negation of -3 = 3 is 3 ≠ 3
the negation of 5 > 2 is 5 ≤ 2
the negation of -3 ≤ -6 is -3 > -6
the negation of x = 4 – y is x ≠ 4 – y
Exercises
1. Write down a statement that is the negation of each of the following statements;
(Note from an earlier observation that there may be various ways of expressing the negation)
(i) This is a colour printer.
(ii) Jimmy passed all of his examinations.
(iii) This telephone is not working.
(iv) Jimmy failed one subject. [Be very careful here!]
2. Write down an algebraic statement that is the negation of each of the following:
(i) 10x2 = 250
(ii) 5x > 20
(iii) x2 – 4 < x
(iv) x–y≤4
(v) 2x + 1 ≥ 11
Boolean Algebra 7.5
7.3 THE “AND” CONJUNCTION

And conjunction joins two statements.
If we join two statements (each of which is either true or false) using a conjunction, the result is a single
statement that is itself either true or false.
We will look at two common conjunctions, called AND and OR. An example of a statement using the
AND conjunction might be: “The television is broken AND the radio has flat batteries”
In the same way that we have a precise definition of negation, we similarly have a precise definition of
the truth/falsity of a statement using the AND conjunction.
The following table (called a truth table) tells us about the truth or falsity of two statements joined
using AND conjunction. In this table, Statement 1 and Statement 2 can themselves be TRUE or
FALSE.
If Statement 1 is … and Statement 2 is … Then Statement 1 AND Statement 2 is ...
TRUE TRUE TRUE
TRUE FALSE FALSE
FALSE TRUE FALSE
FALSE FALSE FALSE
Example: Decide whether the following statement is TRUE or FALSE.

“Today has 25 hours AND there are 60 minutes in each hour”
Solution: “Today has 25 hours” is FALSE.

“There are 60 minutes in each hour” is TRUE.
From the truth table, we see that FALSE AND TRUE is FALSE.
We deduce that “Today has 25 hours AND there are 60 minutes in each hour” is a
FALSE statement.
Note: The statement is not half true and half false - it is false!
Example: (a) In what circumstance(s) is the following statement true?

“The printer is a LaserJet AND the printer prints 15 pages per minute”
(b) In what circumstance(s) is the same statement false?
Boolean Algebra 7.6
Solution: (a) From the truth table we see that an AND statement is true (only) if both
component statements are true. So the statement is TRUE if it is true that “the
printer is a LaserJet” and also that “the printer prints 15 pages per minute”
(b) From the truth table we see that an AND statement is false if either or both
component statements are FALSE. So the statement will be FALSE in any of
the following situations:
(i) “The printer is not a LaserJet” and “The printer prints 15 pages per minute”
(ii) “The printer is a LaserJet” and “The printer does not print 15 pages per minute”
(iii) “The printer is not a LaserJet” and “The printer does not print 15 pages per
minute”
Exercises
1. Indicate whether each of the following statements are TRUE or FALSE.

(a) We watch television program AND we listen to a radio broadcast.
(b) Today has more than 20 hours AND the world is flat.
(c) Sally is a boy’s name AND Edna is not a boy’s name.
(d) 17 is an even number AND we drink chicken legs.
2. In what circumstances are the following statements (i) TRUE and (ii) FALSE.
(a) Today is a Friday AND it is raining.
(b) This is an IBM computer AND this computer is not working.
(c) x < 5 AND x > 0.
(d) x – 3 ≤ 4 AND x = 2.
Boolean Algebra 7.7
7.4 THE “OR” CONJUNCTION

The following truth table tells us about the truth or falsity of a statement involving the OR conjunction.
In this table, Statement 1 and Statement 2 can themselves be TRUE or FALSE.
If Statement 1 is … If Statement 2 is … Then Statement 1 OR

Statement 2 is …
TRUE TRUE TRUE
TRUE FALSE TRUE
FALSE TRUE TRUE
FALSE FALSE FALSE
Example: Decide whether the following statement is TRUE or FALSE.

“Today has 25 hours OR there are 60 minutes in each hour”
Solution: “Today has 25 hours” is FALSE.

“There are 60 minutes in each hour” is TRUE.
From the truth table, we see that FALSE OR TRUE is TRUE.

So “Today has 25 hours OR there are 60 minutes in each hour” is a TRUE statement.
Example: (a) In what circumstance(s) is the following statement true?
“It is raining OR It is getting dark”
(b) In what circumstance(s) is the same statement false?
Solution: (a) From the truth table we see that an OR statement is TRUE if any of the
component statements are TRUE. So the statement is TRUE if
(i) “It is raining” and “It is getting dark”.
(ii) “It is not raining” and “It is getting dark”.
(iii) “It is raining: and “It is not getting dark”.
(b) From the truth table, we see that an OR statement is FALSE if all component
statements are FALSE. So the statement will be FALSE only if “It is not
raining” and “It is not getting dark”.
Exercises
1. Indicate whether each of the following statements is TRUE or FALSE.

(a) We watch television OR we listen to radio.
(b) Today has more than 20 hours OR the world is flat.
(c) Sally is a boy’s name OR Edna is not a boy’s name.
(d) 17 is an even number OR we drink chicken legs.
2. In what circumstances are the following statements (i) TRUE and (ii) FALSE
(a) Today is a Friday OR it is raining.
(b) This is an IBM computer OR it is not working.
(c) x < 5 OR x > 0.
(d) x – 3 ≤ 4 OR x = 2.
Boolean Algebra 7.8
7.5 MULTIPLE CONJUNCTIONS

We can combine more than two statements using the AND and OR conjunctions, or a combination of
ANDs and ORs.
Connecting Multiple Statements using AND
We can use AND conjunctions to join more than two component statements. For example we could use
the three statement clause:
Statement 1 AND Statement 2 AND Statement 3
We can decide upon the truth or falsity of this statement by introducing brackets and using the results of
section 6.2.
Example: Find the truth or falsity of the single statement below;
Today has less than 35 hours AND Today is not a new year’s day
AND There are 32 days in this month.
Solution: If we introduce brackets around the first two components of this statement, we get:
(Today has less than 35 hours AND Today is not a new year’s day)
AND There are 32 days in this month.
Now “Today has less than 35 hours” is TRUE, “Today is not a new year’s day” is
TRUE, and “There are 32 days in this month) is FALSE, so our compound statement has
the truth/falsity value:
(TRUE AND TRUE) AND FALSE
We can use our truth table to interpret inside the brackets. It is TRUE. So the statement
becomes:
TRUE AND FALSE

which in turn is FALSE
Note: We could introduce brackets around the last two statements. If we do this we find that the
statement still has a value of FALSE. In fact we can show that the order in which we introduce
brackets does not affect the truth/falsity value of the compound AND statement.
A useful rule that covers the joining of any number of statements with AND clauses:
If we AND two or more statements, the resulting

compound statement is TRUE if the component
statements are all true, otherwise it is FALSE.
If we were to use this rule with the above example, we would find the statement had a value TRUE
AND TRUE AND FALSE. Since not all component statements are TRUE, the compound statement is
FALSE.
Boolean Algebra 7.9
Exercises

(a) We watch television AND we listen to radio AND we eat ice cream.
(b) Today has more than 20 hours AND the world is flat AND there are little green men on
the moon.
(c) 120 is an even number AND 5 x 3 = 15 AND 132 < 160.
(d) Rugby is a football sport AND soccer is a football sport AND tennis is a football sport
AND American gridiron is football sport.
2. Give one circumstance for which each of the following statements are TRUE and one
circumstance for which they are FALSE.
(a) Today is a Friday AND it is raining AND rats like this food.
(b) This is a 4WD AND it is not working AND one tyre is flat.
(c) x < 5 AND x > 0 AND x > 2.
(d) x – 3 ≤ 4 AND x = 2 AND x > -10.
Connecting Multiple Statements using OR
We can use OR conjunctions to join more than two component statements. For example we could use
the three-statement clause:
Statement 1 OR Statement 2 OR Statement 3
We can decide upon the truth or falsity of this statement by introducing brackets and using the results of
section 6.3. Alternatively we can use the following rule that covers the joining of any number of
statements with OR clauses:
If we OR two or more statements, the resulting

compound statement is TRUE if at least one of the
component statements is TRUE, otherwise it is FALSE.
Example: Find the truth or falsity of the single statement below;
Today has less than 5 hours OR Today is not new year’s day OR There are 32 days in
this month.
Solution: The component statements are respectively TRUE, TRUE and FALSE.
Since at least one (here, in fact two) of the component statements are TRUE, the
compound statement is TRUE.
Note: We could introduced brackets as we did for multiple AND statements. Similar to that situation,
the order is which we introduce brackets does not affect the truth/falsity value of the
compound OR statements.
Boolean Algebra 7.10
Exercises (cont)

(a) Computers are powered by diesel fuel OR a mouse is bigger than an elephant OR last
year every student failed MA111.
(b) Rugby is a football sport OR soccer is a football game OR tennis is a football game OR
American gridiron is a football sport.
(c) Tennis is not played by women OR a tennis ball is round OR tennis is only played at
night OR tennis racquets are made from rotten cheese.
4. Give one circumstance for which each of the following statements are TRUE and one
circumstance for which they are FALSE.
(a) Today is a Friday OR it is raining.
(b) This is an IBM computer OR it is not working.
(c) x < 5 OR x > 0.
(d) x – 3 ≤ 4 OR x = 2.
Using ANDs and ORs in the Same Statement
If we combine a mixture of ANDs and ORs we have some interpretation problems, because the order
we introduce brackets into the expression may affect the truth or falsity of the conjunction. This is
illustrated in the following example.
Example: Show that the truth/falsity of the statement:
“Today has 25 hours AND today is not new year’s day

OR There are not 32 days this month”
Changes if we introduce brackets in different ways.
Solution: The component statements are respectively FALSE, TRUE and TRUE.
If we introduce brackets around the first two statements, we get:
(FALSE AND TRUE) OR TRUE

which is: FALSE OR TRUE
which in turn is: TRUE
However if we introduce brackets around the last two statements, we get:
FALSE AND (TRUE OR FALSE)

which is: FALSE AND OR TRUE
which in turn is FALSE
Since bracketing different ways may give a different truth/falsity value, we need a rule of precedence. In
the absence of brackets, ANDs should be processed before ORs.
(Note: This is analogous to the rules of hierarchy of operations in algebra … where in the absence of
brackets, multiplication/division is processed before addition/subtraction).
Using this convention we would have that:
Today is not in January AND Today has 24 hours

OR There are not 32 days this month
Should be processed as:
(Today is not in January AND Today has 24 hours)

OR There are not 32 days this month
whereas
Today is not in January OR Today has 24 hours
AND there are not 32 days this month
Should be proceed as
Today is not in January OR (Today has 24 hours

AND There are not 32 days this month)
Example: Evaluate the truth or falsity of the statement.
5 > 2 OR 11 < 10 AND -2 < 0
Solution: Our insertion of brackets should be:
5 > 2 OR (11 < 10 AND -2 > 0)
We can now evaluate this as:
TRUE OR (FALSE AND TRUE) TRUE OR FALSE,

TRUE
Ie, 5 > 2 OR 11 < 10 AND -2 > 0 is a true statement!
Exercises (cont)

(a) Computers hang from the ceiling OR a mouse is an animal.
(b) Blood is blue OR grass is red AND milk is white.
(c) (We write with pencils OR we write with biros) AND we write with coconuts.
(d) Accountancy is about cooking AND (cooks do not work at night OR we need food to
live).
6. Give an example of a situation where the following statement is TRUE and another where it is a
FALSE.
(a) Joe is an accountant AND Joe is a male OR Joe has an Accountancy degree.
(b) Sally is an economist OR Sally is a female AND Sally has an Economics degree.
(c) Jim is an engineer AND (Jim is a female OR Jim has an Engineering degree).
(d) (Xo is a chemist OR Xo is a Chinese) AND Xo is married.
7.6 NEGATION OF STATEMENTS CONTAINING AN “AND” OR AN “OR”

We can express the negation of a compound statement (ie, one that contains one or more ANDs or
ORs). We will state the two simplest (which may be proved by constructing an appropriate truth table –
which your tutor may do in class, or which may be found in reference books on discrete mathematics or
logic).
In the following, S1 and S2 are statements which may be TRUE or FALSE.
NOT (S1 AND S2) is equivalent to NOT S1 OR NOT S2

NOT (S1 OR S2) is equivalent to NOT S1 AND NOT S2
We can derive other results from these, for example:
NOT (NOT S1 AND NOT S2) is equivalent to S1 OR S2.
Example: Find the negation of the statement:
“This coin is not a legal tender AND this note is torn”
And use the boxed result to write the negation in a different manner.
Solution: The negation would be:
NOT “This coin is not a legal tender AND this note is torn”
We can use the above result to simplify this to:
“This coin is legal tender OR this note is not a torn”
Note: We can show that the two last compound statements are logically identical by looking at all
possible truth/falsity values of the two statements. Here is one combination:
Assume that “This coin is not legal tender” is TRUE and “This note is torn” is FALSE, then “This coin
is not legal tender AND this note is torn” is TRUE AND FALSE, which is FALSE. The negation of
this will be TRUE.
Now “This coin is legal tender” is FALSE and “This note is not torn” is TRUE, so “This coin is a legal
tender OR this note is torn” is FALSE OR TRUE, which is TRUE.
You should check that this works for all other truth/falsity combinations of the two component
statements.
Exercises
1. Write down the negation of the following statements in the simplest manner possible. (Note you
do not have to say whether the negation is TRUE or FALSE.
(a) Computers are not alive OR a mouse is bigger than an elephant.
(b) Friday is not the first day of the week AND mangoes are not violet.
(c) Jumbo is not a small elephant OR Tea is not made from coffee beans.
7.7 APPLICATION TO DATABASE QUERIES

AND, OR and NOT are used in retrieving information from databases.
Example: A company has a database of information on its employees. We wish to query the data
base to find all employees that satisfy all of the following three criterions.
(1) “the employee has worked for the company for more than 6 months”,
(2) “the employee has a salary of more than K20,000”, and
(3) “the employee has not taken leave in the current calendar year”
[We do not want to list any employees that do not satisfy all three criteria].
Solution: We submit a Boolean Algebra query to the database. All three criteria must be satisfied,
so we should AND the criteria. The Boolean Algebra statement could be:
“the employee has worked for the company for more than 6 months” AND “the
employee has a salary of more than K20,000” AND NOT “the employee has taken
recreation leave in the current calendar year”
Note: If we had required employees who had satisfied at least one of these criteria, then we would have
used an OR in place of the AND. If we had required employees who had satisfied (say) at least two of
the criteria then the appropriate Boolean statement is more difficult (but possible) to construct.
Example: From the same database, which employees would be located if we used the following
Boolean Algebra query?
“the employee has taken more than 20 days sick leave this year OR the employee has
more than 20 days sick leave last year AND the employee has worked with the company
for more than 10 years”.
Solution: We must process the AND before the OR. So we will first locate the employees who
had both taken 20 days sick leave last year and worked for the company for more than
ten years. Next we will locate any of the above employees and any employee that has
taken more than 20 working days this year.
Exercises
1. A database has information about VCD’s held by a VCD film library. For each VCD the
database records the release of the film, the name of the film, the main two actors, the director,
the viewing classification (eg, <R>), and the type of film (eg, comedy, adult, etc). Devise a
Boolean Algebra query that would return the following:
(a) film that satisfy any of the following: (i) The film must be released in 1999,
(ii) the film as a <R> rating, (iii) a main actor is George Clooney.
(b) film that satisfy all of the following: (i) The film is a comedy, (ii) the director is
not Fred Zimerman.
(c) films that satisfy that the film is rated <R>, and at least one of the following:
(i) the film is a comedy, (ii) the film was released in 1997.
Counting Principles 8.1
CHAPTER 8: COUNTING PRINCIPLES
Counting Principles is another topic from discrete mathematics. The aim is to determine the number of
ways something can happen without counting.
Here is a counting problem. In Papua New Guinea, regular car number-plates use a 3 letters and 3 digit
code (eg, LAG778). Suppose all letters and all digits are allowed – how many different number-plate
codes could be generated using this system?
We could enumerate all codes systematically and then count the possibilities. The first three codes
might be: AAA000, AAA001, AAA002, and the last two codes might be: ZZZ998, ZZZ999. If we
were to count all possible codes we would find there are approximately 1.76 million codes using this
scheme. The results of Counting Principles allow us to determine the total number of number-plate
codes without counting.
There are three functional keys on your calculator concerned with counting. They are the factorial
function (n!), the permutation function (nPr), and the combination function (nCr). We will investigate
the use of the factorial and permutation functions.
8.1 THE MULTIPLICATION PRINCIPLE OF COUNTING

Counting results are based on the following very simple counting principle, called multiplication
principle of counting.
We construct a code of r digits. The first digit has

possible values, the second has possible values,
the third has possible values … and the final digit
has possible values.
The total number of different codes that we can
construct is
To see why this simple rule works, we will take a situation where the code is constructed of just two
digits. The first digit will be one of the symbols {#, &, *, @}. The second digit will be one of the
symbols {1, 2, 3, 4, 5, 6}. One possible two digit code from this scheme would be &4. As the first digit
has 4 values and the second digit has 6 values, the multiplication principles indicate that there will be
4 x 6 = 24 different codes.
Below we have enumerated systematically all of the possible two digit codes using this scheme. The
codes are:
#1 #2 #3 #4 #5 #6 &1 &2 &3 &4 &5 &6 *1 *2

*3 *4 *5 *6 @1 @2 @3 @4 @5 @6
If we arrange these codes into a rectangular grid we get:
#1 &1 *1 @1
#2 &2 *2 @2
#3 &3 *3 @3
#4 &4 *4 @4
#5 &5 *5 @5
#6 &6 *6 @6
We now have a rectangle of sides 4 (wide) and 6 (high). The number of elements in (or area of) the
rectangle will be 4 x 6 = 24. This geometric analogy shows why the multiplication principle works for
codes of two digits.
If we add extra digits to our code, we just add extra dimensions to our rectangle. For example, for a
three digit code, we get a three dimensional rectangular block of codes.
The formula for the volume of a rectangular block is width x height x depth.
Example: Use the multiplication principle of counting to determine how many different number-
plate codes (from the illustration above) are possible.
Solution: In our number-plate problem the first 3 digits could each have 26 values (the letters of the
alphabet), and the final 3 digits could each have 10 values, (the digits of our decimal
counting system), so we could form
26 x 26 x26 x 10 x 10 x 10 = 17,576,000 number-plate codes.
Example: Suppose number-plate numbers in a province consist of 3 letters followed by 3 numbers.

The first letter must be an “A”, “B”, or “L”. The second and third letters are not allowed
to be “O” or “I” (since they look like 0 and 1). List two legal codes and two illegal
codes. How many number plate codes are possible?
Solution: Two legal codes would be BCA350 and LAC199
Two illegal codes would be BIC139 and COA328
Our code has 6 digits. The first digit can have 3 values (A, B and L).
The second and third digits can have 24 values (the 26 letters of the alphabet minus O
and I). The final three digits can have 10 values (the 10 digits of our decimal systems).
The multiplication principle of counting tells us that there are
3 x 24 x 24 x 10 x 10 x 10 = 1728000
different legal number-plate codes using this system.
Exercises
1. Write down all of the 2 digit codes where the first digit could be any one of the three letters
{X, Y, Z}, and the second digit could be any of the five numbers {5, 6, 7, 8, 9}.
Check that the total number of codes agrees with the number indicated by the multiplication
principle.
2. Write down all of the 3 digit codes where the first digit could be any one of the two symbols
{$, K}, the second digit could be any of the two letters {4, 8}, and the third digit can be any of
the three symbols {1, 3, 5}.
Check that the total number of codes agrees with the number indicated by the multiplication
principle.
3. Use the multiplication principle to answer each of the following:

(a) If a telephone must have seven digits, and start either 472…, 473…, or 475…, how many
different telephone numbers are possible?
(b) How many three letter words is possible using the 26 characters of the alphabet?
Repeated letters in words are allowed.
(c) A children’s watch set allows different bands and watch faces to be combined. If there
are 4 different watch faces, and 7 different bands, how many different combinations are
possible?
(d) When planning a party there are several options possible. We might use a live band or
recorded music. We might serve alcohol or soft drinks. We might serve a hot meal or a
cold meal. We might or might not provide seats for all guests. How many different
combinations of these choices (music type, drink type, food type and seating type) are
there?
(e) When purchasing a new motor vehicle, there are many options available. The car may be
purchased with standard or wide tyres. The car might have no radio, a radio, a radio-
cassette, or a radio-cassette-CD player. The car might or might not have air-conditioning.
The car might have a bull bar, a roll bar, or both, or neither. So one purchasing option
might be a car with wide tyres, a radio, air-conditioning, and a bull bar. What is the total
number of purchasing options available for this vehicle?
4. A user has highlighted the portion of a spread sheet consisting of columns C, D, E, F, G and H;
and rows 4, 5, 6, 7, 8, 9 and 10.
(a) Using the fact that the cells form a rectangle, deduce the number of cells in the
highlighted portion of the spread sheet.
(b) Using the fact that the cells have names (or codes) like D8, use the multiplication
principle of counting to deduce the number of cells in the highlighted portion of the
spread sheet.
The answers to (a) and (b) should be the same.
Answers:
3. (a) 30000 (b) 17576 (c) 28 (d) 8 (e) 256

8.2 APPLICATIONS OF THE COUNTING PRINCIPLE

The multiplication principle forms the basis of solving all problems involving counting, and can be used
to derive several important counting formulas.
The first formula is a special case of the counting principle where each of the r digits can take the same
n values. The counting principle tells us that there are different possible
codes.
We construct a code of r digit. Each digit can take one

of the same n possible values. The total number of
different codes that can be constructed is .
Example: We wish to make a code of five digits. Each digit can take any one of the values A, C or
E, (So some possible codes are CCEAE, AAEAC, CCCCC, etc.). How many different
codes can we form?
Solution: We have n = 5 digits, in which each can take r = 3 values.

There are 35 = 243 ways of forming the code (or 243 different codes)
Exercises
1. We wish to make a code of 4 digits, where each digit can be a “+” or a “-“ or a “o”.
(One possible code could be “o o - +”)
(a) How many different codes can we construct?
(b) Write them all down.
2. (a) How many four letter words can we make using the standard alphabetic characters
(where repeated characters are allowed)?
(b) How many six letter words can we make using the standard alphabetic characters (where
repeated characters are allowed)?
3. Number systems:
The decimal number system (ie, our usual counting system) has 10 digits [0, 1, 2, 3, 4, 5, 6, 7, 8
and 9].
The binary number system has 2 digits [0 and 1].
Codes (ie, numbers) can be formed by combining digits in each system. For example, a 5 digit
code in the decimal system could be “38610”. A 3 digit code in the binary system could be
“01101”.
(a) Write down an 8 digit code in each system.

(b) How many different codes are possible with 3 digits in each system?
(c) How many different codes are possible with 5 digits in each system?
(d) How many different codes are possible with 8 digits in each system?
Answers:
1. 81 2. (a) 456976 (b) 308915776

3. (b) 1000 and 8 (c) 100,000 and 32 (d) 100,000,000 and 256
Permutations
Sometimes when forming a code where each digit is constructed from the same set of values, the code
cannot use a digit value more than once.
For example, we wish to make a code with 3 digits, where each digit can be one of the values @, &, %,
#, * and $. However any digit may not be used more than once. Some possible codes are “&$%”,
“&$%”, etc. But code “$&$” is not allowed since the $ appears twice.
In this example, the first digit could take one of 6 different values. Now one value is used and so the
second digit can now take one of only 5 remaining different values. And once one of these is used, there
are 4 different values left for the third digit. The counting principle tells us that there are 6 x 5 x 4 = 120
possible different codes.
In general we have:
We construct a code of r digits. Each digit can take one

of a common set of n possible values. But each value
can be used only once in the code. The total number of
different codes that can be constructed is
nPr = n(n-1)(n-2)…(n-r+1)
Notes: (1) Each different code is a permutation (of the n values). The formula (often designated by
nPr) is programmed into most scientific calculators.
(2) Because in this system we are not allowed to use the same digit value more than once, it
is termed a without replacement system. This contrasts with the first (with
replacement) system in this section where digit values could be used any number of
times.
(3) If we were to apply the formula to our example above (where n=6 and r=3), then n-r+1
would be 6 – 3 + 1 = 4, and so our counting formula would be 6 x 5 x 4 (as above).
Example: We wish to form a 7 digit code, where each digit can use the values 1, 2, 3, 4, 5, 6, 7, 8,
9, A or B. No digit may be used more than once. How many different codes are
possible?
Solution:
Since we are forming codes without replacement, we use the permutation formula. We
have r=7 digits in a code, and initially each digit has n = 11 values. The total number of
different codes is
11P7 = 11 x (11 – 1) x (11 – 2) x … x (11 – 7 + 1)

= 11 x 10 x 9 x … x 5
= 1663200
[The calculator key sequence for 11P7 is 11 nPr 7 =]

Exercises
1. We wish to form a 3 digit code using the set of digits 4, 5, 6 and 7. No digit is allowed to be
used more than once.
(a) How many different codes are possible?
(b) Write down all of the possible codes.
2. Use permutation formula to answer the following questions:

(a) There are 8 teams in a football competition. How many different 1-2-3 rankings are
possible at the end of the competition?
(b) A horse race has 5 horses. In how many different ways may the horses finish first,
second and third in the race?
(c) A classroom consists of 5 rows of 4 desks. 20 students are in the classroom. In how
many different ways may the students be seated in the front four desks?
(d) A computer screen has 16 colours available. One colour is used for the print colour, one
for the background, one for highlighting, and one for boxes. How many different
permutations are possible? (We must use a different colour for each purpose).
(e) There are six books to arrange on a shelf. The shelf will only hold three of the books. In
how many ways can the books be placed on the shelf?
3. Why is it impossible to form a “without replacement” code of (say) 5 digits when the digits can
have 3 values?
Answers:
1. (a) 4P3 = 24 (b) Show you tutor

2. (a) 8P3 = 336 (b) 5P3 = 60 (c) 20P4 = 116280 (d) 16P4 = 43680 (e) 6P3 = 120
Factorials
Sometimes the number of digits in a code constructed without replacement is the same as the number of
values each digit may take. For example, we might make four digit codes (without replacement) where
the digit values are W, X, Y and Z (one possible code might be XYZW). This is a special case of the
last result, and we have:
We construct a code of n digits. Each digit can take one

of the common set of n possible values. Each value can
be used only once in the code. The total number of
different codes that can be constructed is
n! = nPn = n(n-1)(n-2)…1
nPnis called the factorial function, and is given the symbol n!. You will find the factorial function
programmed into most scientific calculators.
Example: We wish to make four digit codes (without replacement) using the four digits W, X, Y
and Z. How many such codes are possible?
Solution:
We can make 4! = 4 x 3 x 2 x 1 = 24 different codes.
Exercises (cont)
4. In the example above we declared that there were 24 different codes. One is “XYWZ”. Write
down the other 23.
5. Use the factorial formula to answer the following questions:
(a) How many different 10 digit decimal numbers can be constructed if each of the 10
standard digit values may be used only once?
(b) 20 students are to use 20 computers. In how many ways may the students sit themselves
down at the computers?
(c) Six books are to be arranged on a bookshelf. In how many ways may this be done?
(d) Four questions are to be arranged on an examination paper. In how many different ways
may they be arranged?
(e) If I deal out all 52 cards from a standard playing card pack, in how many different ways
might I do this?
Answers:
5. (a) 10! = 3 628 8000 (b) 20! (c) 6! = 720 (d) 4! = 24 ways (e) 52! = 8.055 x 1067
Marginal Analysis 9.1
CHAPTER 9: MARGINAL FUNCTIONS
Economists and business people use terms like “marginal profits”, “marginal costs” and “marginal
taxation rates”. Here we look at the mathematics of marginal functions.
[The term “marginal function” means something rather different in statistics. The “marginal” function
as used in economics is also known in general mathematics as a “forward difference” function or
“average rate of change” function].
9.1 MARGINAL VALUES AND FUNCTIONS
We begin by defining the marginal value of a function. This is simply the difference in the dependent
value of the f unction at two independent variable values one unit apart.
For the function f(x), the marginal value at x=a is f(a+1) – f(a).
Example: Find the marginal value of the function f(x) = 3x2 – 2x + 1 at x=2.
Solution: Marginal value (at x = 2) = f(3) – f(2)

= 22 – 9
= 13
The marginal function is the function that gives the marginal value of the parent function.
Example: Find the marginal function Mf(x) corresponding to the function

f(x) = 3x2 – 2x + 1.
Solution: Mf(x) = f(x+ 1) – f(x)

= [3(x+1)2 – 2(x + 1) + 1] – [3x2 – 2x +1]
= 3x2 + 6x + 3 – 2x – 2 + 1 – 3x2 + 2x – 1
= 6x + 1
Note: Mf(2) = 6 x 2 + 1 = 13, which agrees with the result of the first example.
Exercises
1. By using the formula “marginal value at a = f(a+ 1) – f(a)”, find the marginal values for the
following functions at the indicated points:
(a) f(x) = 5x – 2 at x = 11
(b) f(x) = x2 +4x – 2 at x = 7
(c) f(x) = 4 at x = 35
(d) f(x) = 4 log(3x) at x = 20
(e) f(x) = 5 x 1.27x at x = 2.5
2. Find the marginal functions associated with the following parent functions:
(a) f(x) = 5x – 2
(b) f(x) = x2 + 4x – 2
(c) f(x) = 4
3. Show that when the marginal functions in exercise 2 are evaluated at the points used in exercise
1, the marginal value in exercise 1 is obtained.
Answers:
1. (a) 5 (b) 18 (c) 0 (d) 0.0848 (e) 2.45
9.2 MARGINAL PROFITS
Many functions in business and economics have fixed and variable components. Consider as an
illustration of the cost of producing a manufactured commodity. There will probably be many fixed cost
component in the final cost function – including purchase/rental of manufacturing equipment, payments
for the premises, some administration costs, employee salaries, etc. There will also be many variable
costs – including purchase of raw materials, shipment of product, electricity/water usage, other
administration costs, etc. The marginal cost function will give the difference between producing (say) x
and x + 1 items, and so will give the cost incurred in producing one extra item. This calculation
effectively removes all fixed costs incurred in production. We would obviously expect that it would
cost more to produce more items, and so we would expect the marginal cost function to be positive.
As another, more important, illustration – consider a profit function. The profit in producing a certain
number of items is the difference between the revenue received in selling the items and the cost of
producing the items. In symbols, we would write
P(x) = R(x) – C(x)
The profit function will be more complex than either revenue or cost functions. For example, if we
produce and sell more of a commodity, we would expect both the revenue and cost functions to increase
– in other words, the marginal revenue and marginal costs function will be positive. However the profit
function may increase or decrease. If, at a particular level of production, the revenue function is
increasing faster than the cost function, the profit function will increase, and the marginal profit will be
positive. On the other hand, if the cost function is increasing faster than the revenue function, then the
profit will decrease, and the marginal profit will be negative. If the marginal profit function is positive,
we will make a bigger profit by producing more of
the commodity. However if the marginal profit is negative, we will make a bigger profit (or perhaps
less of a loss) by producing less. As a general principle, if we wish to maximise our profits in
theory, we should aim at a production level which makes the marginal profit zero.
Example: A company produces items. A model for the cost in Kina for producing x items annually
is determined to be C(x) = 12000 + 400x + 0.003x2. The company sells all items that it produces at a
fixed price of K520 per item.
(a) Find the formula of the revenue function for selling x items of this commodity.
(b) Find the marginal cost and revenue functions for selling x items of this commodity.
(c) Find the profit function for producing and selling x items of this commodity.
(d) Show that the marginal profit function is positive for x = 1200 units, and negative for x = 35000
units.
(e) By finding the value of x at which the marginal profit function is zero, deduce the level of
production that will maximise the company’s profits.
(f) Draw a graph of cost and revenue verses production, and check that the maximum profit occurs
at the level of production predicted in (e).
(g) What is the maximum annual profit for this company?
Solution: (a) The revenue function (for selling x items) will be R(x) = 520x
(b) MC(x) = [12000 + 400(x + 1) + 0.003(x + 1)2] – [12000 + 400x + 0.003x2]
= 8000 + 400x + 400 + 0.003x2 + 0.006x + 0.003
- 8000 – 400x –n 0.003x2
= 400 + 0.006x + 0.003
= 0.006x + 400.003
MR(x) = 520(x + 1) – 520x = 520
(c) P(x) = R(x) – C(x)
= 520x – [12000 + 400x + 0.003x2]
= 120x – 12000 – 0.003x2
(d) The easiest way to find marginal profits is to first calculate the marginal profit
function. We can do this in two ways:
MP(x) = P(x+1) – P(x)

= [120(x + 1) – 12000 – 0.003(x +1)2] – [120x – 12000 + 0.003x2]
= 120 – 0.006x – 0.003
= 119.997 – 0.006x
or MP(x) = MR(x) – MC(x)

= 520 – [0.006x + 400.003]
= 119.997 – 0.006x
At a production level of 1200, MP(1200) = 119.997 – 0.006 x 1200

= 112.797 (positive)
At a production level of 35000, MP(35000) = 119.997 – 0.006 x 35000
= -90.003 (negative)
(e) We would expect maximum profit to occur when the marginal profit is zero. This
occurs when
119.997 – 0.006x = 0
x = 119.997 ÷ 0.006
= 19999.5 (or 20000 units)
(f) A spread sheet has been used to draw the following graph.
You will observe that revenue (the straight line) exceeds cost (the curve) by a
maximum amount when x = 20000.
(g) The maximum profit is P(20000) = 120 x 20000 – 12000 – 0.003 x 200002
= 1188000 (Kina per year)
Exercises
1. A cost function is determined to be C(x) = 200 + 6x + 0.003x2, where x is the number of items
produced.
(a) Find the marginal cost function MC(x).
(b) Use two different methods to find the marginal cost for producing an extra item when
120 items are produced.
2. A profit function is determined to be P(x) = 24x – 0.004x2 – 450, where x is the number of items
produced and sold.
(a) Find the profit when x = 400.
(b) Find the formula for the marginal profit function MP(x).
(c) Find both the profit and the marginal profit when x = 400.
(d) Use your answer in (c) to determine whether the company should increase or decrease its
production from this level to increase profits. Explain your reasoning.
(e) Find both the profit and marginal profit when x = 3700.
(f) Use your answer in (c) to determine whether the company should increase or decrease its
production from this level to increase profits. Explain your reasoning.
(g) By finding the value of x at which the marginal profit function is zero, deduce the level of
production that maximises profits, and determine the maximum profit.
3. A furniture manufacturer determines that the price he can sell items for is SP = 1000 – q, where
q is the number of items sold. [Note: If he lowers his selling price he can sell more
items, so an item sold is a function of selling price]. The cost for producing q items is
determined to be C(q) = 3000 + 400q.
(a) Write down a formula for q in terms of the selling price SP.
(b) Determine a formula (a function R(q)) for the revenue for selling q items.
(c) Determine a formula (a function P(q)) for the profit for selling q items.
(d) Find the marginal profit function P(q).
(e) (i) At what level of production will profits be maximised?
(ii) What will be the selling price of items at this level of production?
(iii) What would be the maximum profit?
4. The profit function was define to be P(x) = R(x) – C(x). Starting with this formula, and the
definition of a marginal cost and marginal revenue functions, use algebra to show that
MP(x) = MR(x) – MC(x)
5. Maximum profit usually occurs when the marginal profit is zero. Use the formula in question 4
to show that this occurs when the marginal revenue equals the marginal cost.
9.3 MARGINAL TAXATION RATES

Another example of using marginal functions occurs with taxation.
An income taxation rate is statement of how much tax is to be paid on a gross salary as a percentage. If
for a gross salary is K1240 per fortnight the taxation rate is 35% (or 35 toea in the Kina), then the tax to
be paid on the K1240 would be 0.35 x 1240 = K434 [and hence the net, or take home, pay without other
deductions would be K1240 – K464 = K806].
The marginal tax rate is the extra tax that would be paid if an extra Kina were earned. In the above
illustration, if the tax paid on K1241 was K434.50, then the marginal tax rate would be
K434.50 – K434 = K0.50 (or 50 toea). 50 toea in one Kina is 50%, and so we would say that at K1240
per fortnight, the marginal tax rate is 50%. [Recall from above that the actual tax rate was 35%].
We will look at marginal taxation rates in a later Business Mathematics module.
9.4 INTERPRETATION OF MARGINAL FUNCTIONS AS RATES OF

CHANGE
An average rate of change, or slope of a chord, is defined loosely as “rise over run”, or more correctly
as the change in the dependent value of a function divided by the corresponding change in the
independent value.
Formally, the average rate of change of function y = f(x) between the points x=a and x=b is:
( ) ( )
Average Rate of Change
For a linear function, the average rate of change or slope is the coefficient of x, and is constant. For
example, the slope of the function y = 4x – 7 is 4. For non-linear functions the slope changes depending
on the values of a and b chosen.
A marginal function (as used in economics) is an average rate of change function. To see this, consider
the following: For a function y = f(x), the corresponding marginal function was defined to be
Mf(x) = f(x + 1) – f(x). The average rate of change of y = f(x) between x and x + 1 would be,
( ) ( )
( ) ( )
( )
The marginal function and (average) rate of change function have the same formula.They are the same
function!
We can use this relationship to provide geometric meanings to marginal functions. For example, the
marginal cost of producing an item is the rate of increase of cost at the current level of production. The
marginal profit is the rate of increase in profit at the current level of production/sales. A marginal tax
rate is the rate of increase in taxation at the current level of taxable income.
On a graph, a function is represented by a curve or straight line. The value of the function is read off the
graph along the y-axis. On the same graph, the value of the corresponding marginal function is the slope
of the parent function at the point of reference. This is illustrated in the diagram below. In this diagram,
the marginal value at a is equal to the slope of the chord drawn between the function values at a and a+1
(since the run is 1 unit). In turn, this slope is close to the slope of the tangent at a, which is the rate of
change of the function at a.
Appendix Appendix -1
Appendix: REVIEW OF HIGH SCHOOL TOPICS
This chapter contains some revision questions relating to the material in chapter 1. It will not be
covered in class, but the questions are for you to review your high school topics. All of the work is
basic to being able to use mathematics at University and in the workplace.
ORDER OF OPERATIONS
1. Evaluate the following expressions without using a calculator;

(a) 5 + 3 x 4 – 12 ÷ 2 (b) 5 + 3 x (4 – 12 ÷ 2)
(c) 5 + (3 x 4 – 12) ÷ 3 (d) (5 + 3 x 4 – 12) ÷ 3

(a) 5 – 32 (b) (5 – 3)2
2
(c) 5 – (-3) (d) 5 – (-3)3
(e) 5 - -(32) (f) (5 - -3)2
(a) (b)
(c) (d)
INDICES
1. Write each of the following as decimal numbers (without using a calculator);

(a) 23 (b) 3.70 (c) 5-1 (d) 2-3
1 4 -3
(e) 7.25 (f) 3.5 x 10 (g) 13.5 x 10 (h) 13.5 x 100
(i) 640.5 (j) 641/3 (k) 274/3 (l) (-4)1
2. Use the properties of indices to simplify each of the following or write in a different way;
(a) 32+x (b) 15x ÷ 3x (c) 3a2a
t y 2
(d) 7.5 x 7.5 (e) (5x) (f) (5x)2
(e) 4t ÷ 4y (f) (x ÷ 5)2 (g) 4(2x)3
3. Which of the following statements are true and which are false:
(a) (2x + y)2 = 4x2 + y2 (b) √( )
(c) (2x x y)2 = 4x2 x y2 (d) √
(e) (3x2 – 5)0 = 3x2 – 5 (f) (x + 1) (x + 1) (x + 1) = x3 + 1

MANIPULATING FORMULAS AND EQUATIONS
We are often required to rearrange a formula (to make a new variable the subject), or to solve an
equation for the value of a variable. The basic rule for such manipulations is “whatever you do to one
side you should do to the other”. In particular we can:
 add or subtract a term from each side of a formula or equation,
 multiply or divide each side of a formula or equation by a factor,
 (with restrictions) apply a function to both sides of a formula or equation at any time.
 Switch the left hand and right hand side of a formula or equation at any time.
Make R the subject of the formula: SI = P x R x T

Solve FV = PV(1 + )nt for i.
HIGHEST COMMON FACTORS AND LOWEST COMMON MULTIPLES
We often have a set of two or more numbers or algebraic expressions.
The largest number or algebraic expression that will divide into each of the expressions is called the
highest common factor. We used the highest common factor to factorise algebraic expressions and
simplify fractions.
The smallest number or algebraic expression which each of the expressions will divide into is called the
lowest common multiple. We use the lowest common multiple to place a sum or difference of fractions
over a common denominator.
Factorise 32x2y – 24xy2 + 28xy3
Place the following over a common denominator
REMOVING BRACKETS
We remove brackets to turn a product of factors into a sum or difference of terms. This skill is needed
in simplifying formulas and solving equations.
Particular care must be taken with signs when removing brackets – taking note of the arithmetic rules
+ve x –ve = -ve -ve x + ve = -ve –ve x –ve = +ve
We would use the skills of removing brackets in re-writing (3 – 5x2)(x – 7) without brackets.
FACTORISING
We factorise to turn a sum or difference of terms into a product of factors. This skill is needed in
simplifying formulas and solving equations.
We would use the skills of factorising to express 3xy2 + 7x – 3y3 – 7y as a product of two factors.
FUNCTIONS AND GRAPHS OF FUNCTIONS
Functions are special relationships between variables. The formula for Simple Interest (SI = PxRxT) is
an example of a function. In this function, the 3 variables on the right hand side of the formula (ie, P, R
and T) are called the independent variables, while the variable on the left-hand side of the formula
(ie, SI) is called the dependent variable.
A function may have any number of independent variables, but only one dependent variable.
The key concept of functions is that if we give a value to the independent variable(s), we determine
precisely the value of the dependent variable. For this function we might write SI = f(P, R, T), - which
emphasises the fact that the value of SI depends (or is a function of) the values of P, R and T.
We most often represent functions by formulas. But we can also represent the function by describing
what the function does, or we can draw a graph of the function. If the function has one independent
variable we can use a regular sheet of graph paper to draw its graph. We normally place the
independent variable values along the horizontal axis of this graph paper, and the dependent variable
values along the vertical axis. The function itself is represented by a line trace on the graph paper.
The trace of the function can have almost any shape, with one exception – a vertical line on the graph
paper should cut the tract of the function at most once. In fact it turns out that if we may represent the
function by a simple formula, then the trace usually turns out to be a straight line or relatively simple
sooth curve.
Below is a graph of the function y = 1.051.4n [Note: this function could be represented as y = f(n) ]
LINEAR FUNCTIONS
Linear functions are the most commonly used of all mathematical functions. They are used to create
mathematical models of real life situations.
The graph of a linear function is a straight line.
The general formula of a linear function is: y = mx +c. The slope ( ) of the straight line graph of
this function is m, and the y-axis intercept is c.
If we write the formula in the form , then the straight line cuts the x-axis at b and the y-axis at
c.
As an example, the graph of the function r = 0.2 + 0.5t is a straight line which cuts the r-axis at 0.2
and has slope + 0.5.
QUADRATIC FUNCTIONS
The graph of a quadratic function is a parabola.
The general formula of a linear function is: y = ax2 + bx + c. The graph of this function intercepts the
y-axis at c. If a is positive, the parabola has a minimum turning point. (If a is negative, it has a
maximum turning point).
If we factorise the right hand side, and write the formula in the form y = a(x - b)(x - d), then the parabola
cuts the x-axis at x=b and x=d.
If we write the right hand side in the completed square form y = a(x – p)2 + q, then the coordinates of
the turning point of the parabola are (p, q).
The graph of the quadratic function y = x2 – 7x + 10 is a parabola which cuts the y-axis at + 10, and
has a minimum turning point (since a=1 is positive). We could factorise the right hand side of the
formula to get y = (x – 2)(x – 5). We now know that the function cuts the x-axis at x=2 and x=5. We
could complete the square on the right hand side of the formula to get y = (x – 3.5)2 – 2.25. We now
know that the turning point of the parabola has coordinates (3.5, -2.25).
EQUALITIES AND INNEQUALITIES
Consider two values a and b.
 If the two values are equal, we write a = b.

 If the two values are not equal, we write a ≠ b.
 If the value of a is less than (or more negative) than the value of b, we write a < b.
 If the value of a is greater than (or more positive) than the value of b, we write a > b.
 If the value of a is not greater than the value of b, we write a ≤ b.
 If the value of a is not less than the value of b, we write a ≥ b.
SIMULTANEOUS EQUATIONS
Occasionally we are faced with a situation where we must find a value that satisfies two or more
equations at the same time. Most often these equations are linear, and we call the set of the equations to
be solved “simultaneous equations”. The method of solving such sets of equation is to attempt to
combine two equations, forming another equation with one less variable. We continue this until we
have one equation in one variable.
To solve the linear equations 3x – 5y = 10

and 9x + y = 46 simultaneously, we could multiply the first by 3 (to
get 9x – 15y = 30), then subtract this from the second equation to get (9x + y) – (9x – 15y) = 46 – 30.
Simplifying this gives 16y = 16. Solving this single equation is one variable gives y = 1. Substituting
y=1 back into the first equation now gives 3x -5 = 10. Solving this single equation in one variable gives
x=5 and y=1.
CONVERTING WORD PROBLEMS TO FORMULAS AND EQUATIONS
The purpose of mathematics is to allow us to solve real world problems by making a mathematical
model of the problem then solving the problem. For example, in business studies we must calculate
interest, and set us annuities, and examine loan repayment schemes. Each problem requires us to build
up a mathematical model of the process. For example, in simple interest calculations we know that the
interest should be proportional to the principal, the rate of interest, and the time over which the interest
should be calculated. The appropriate constant of proportionality is 1. Putting all this together we may
deduce the simple arithmetic formula SI – PxRxT, which once known may be conveniently used over
and over again.
The procedure of turning a word problem into a mathematical formula or equation is one of the harder
tasks of mathematics. But the task involves some necessary two simple tasks. These are:
 We must introduce a variable (or pro-numeral) to represent any value that may change value – and
in particular for the value that we are trying to find.
 We must attempt to turn phrases and sentences of the word problem to be solved into mathematical
sentences.
Once we have turned a word problem into a mathematical problem, we can then solve the mathematical
problem (if it is an equation). A solution to the mathematical problem is the solution to the real world
problem.
Some problems are very simple, and may only involve one variable. Others are extraordinarily
complicated and may involve many variables. Economist may use functions of a hundred or more
variables to model the way an economy works.

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CONTENTS

1. Review of High School Topics 1.1

2. Working With Functions

3. Applications of Linear Functions

Appendix: Questions for Review of High School Topics

Produced by the; Department of Mathematics and Computer Science,

CHAPTER 1: REVIEW OF HIGH SCHOOL TOPICS

We would need to use these rules of precedence to evaluate the following:

We have the following definitions and rule concerning indices:

We are able to prove that the following rules involving indices:

Compound Interest formula: ( ⁄ )

In fact, most financial mathematical formulas involve indices.

MANIPULATING FORMULAS AND EQUATIONS

We would have to use these operations to do the following:

Make R the subject of the formula:

HIGHEST COMMON FACTORS AND LOWEST COMMON MULTIPLES

We would have to use these operations to do the following:

Place the following over a common denominator

We would use the skills of removing brackets in re-writing ( )( ) without brackets.

FUNCTIONS AND GRAPHS OF FUNCTIONS

The graph of a linear function is a straight line.

EQUALITIES AND INNEQUALITIES

To solve the linear equations 3x – 5y = 10

CONVERTING WORD PROBLEMS TO FORMULAS AND EQUATIONS

CHAPTER 2: WORKING WITH FUNCTIONS

In this chapter we look at the problem of converting a rule into a formula.

2.1 CONVERTING RULES TO SINGLE FORMULAS

When MP = 170, we have SP = 1.1 x 170 = 187 (or K187)

Our final formula must be:

M = A1 + 0.4A2 + 0.5A3 + 0.5T + 0.5E

The first is obviously true. The second gives:

5 + 0.4 x 12.5 + 0.5 x 10 + 0.5 x 20 + 0.5 x 50 = 50 √

The third gives

10 + 0.4 x 25 +0.5 x 20 + 0.5 x 40 + 0.5 x 100 = 100 √

So it seems that our formula is correct.

M = 8 + 0.4 x 20 + 0.5 x 20 + 0.5 x 30 + 0.5 x 65 = 73.5

Using Formulas to Find the Value of an Independent Variable

Secondly we use the re-arranging formula approach:

We now substitute SP=140, and p=0.25 to get

2.2 COVERTING RULES TO MULTIPLE FORMULAS

Example: What is the natural domain for the function √

We could write: √ x 5/3

 For 200 cards or less, charge K20.

Find a formula for this charging function.

Let C = total charge in Kina [dependent variable], and

One formula is C = 20, which should be used if

We read this last multiple formula as:

If n 200 then C = 20, else if n > 200 then C = 1.2 + 0.04n.

C = 1.2 + 0.04 x 350 (kina)

In this next example the multiple formulas has three parts.

Example: A hypothetical charging rule for an electricity utility is as follows:

These charges include VAT.

Find a formula for this charging function.

Solution: Let C = total charge – [dependent variable, in Kina], and

The first is also easy. C = 0.25u.

Our multiple formula becomes:

The small domain value is on the left,

The following are legal:

The following make no sense, and must never be used:

The following make sense, but would be rarely used: